Correlation Between Wartsila Oyj and Stora Enso

Can any of the company-specific risk be diversified away by investing in both Wartsila Oyj and Stora Enso at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Wartsila Oyj and Stora Enso into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wartsila Oyj Abp and Stora Enso Oyj, you can compare the effects of market volatilities on Wartsila Oyj and Stora Enso and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Wartsila Oyj with a short position of Stora Enso. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wartsila Oyj and Stora Enso.

Diversification Opportunities for Wartsila Oyj and Stora Enso

0.89

Correlation Coefficient

Wartsila Oyj  Stora Enso

Very poor diversification

The 3 months correlation between Wartsila and Stora is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Wartsila Oyj Abp and Stora Enso Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stora Enso Oyj and Wartsila Oyj is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Wartsila Oyj Abp are associated (or correlated) with Stora Enso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stora Enso Oyj has no effect on the direction of Wartsila Oyj i.e., Wartsila Oyj and Stora Enso go up and down completely randomly.

Pair Corralation between Wartsila Oyj and Stora Enso

Assuming the 90 days trading horizon Wartsila Oyj is expected to generate 2.22 times less return on investment than Stora Enso. But when comparing it to its historical volatility, Wartsila Oyj Abp is 1.42 times less risky than Stora Enso. It trades about 0.01 of its potential returns per unit of risk. Stora Enso Oyj is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  976.00  in Stora Enso Oyj on October 8, 2024 and sell it today you would earn a total of  4.00  from holding Stora Enso Oyj or generate 0.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Wartsila Oyj Abp  vs.  Stora Enso Oyj

Wartsila Oyj Abp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wartsila Oyj Abp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Stora Enso Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stora Enso Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Wartsila Oyj and Stora Enso

The main advantage of trading using opposite Wartsila Oyj and Stora Enso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wartsila Oyj position performs unexpectedly, Stora Enso can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Stora Enso will offset losses from the drop in Stora Enso's long position.

The idea behind Wartsila Oyj Abp and Stora Enso Oyj pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.