Correlation Between Wartsila Oyj and Tokmanni Group

Can any of the company-specific risk be diversified away by investing in both Wartsila Oyj and Tokmanni Group 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 Tokmanni Group 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 Tokmanni Group Oyj, you can compare the effects of market volatilities on Wartsila Oyj and Tokmanni Group 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 Tokmanni Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wartsila Oyj and Tokmanni Group.

Diversification Opportunities for Wartsila Oyj and Tokmanni Group

-0.36

Correlation Coefficient

Wartsila Oyj  Tokmanni Group

Very good diversification

The 3 months correlation between Wartsila and Tokmanni is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Wartsila Oyj Abp and Tokmanni Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokmanni Group 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 Tokmanni Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokmanni Group Oyj has no effect on the direction of Wartsila Oyj i.e., Wartsila Oyj and Tokmanni Group go up and down completely randomly.

Pair Corralation between Wartsila Oyj and Tokmanni Group

Assuming the 90 days trading horizon Wartsila Oyj Abp is expected to under-perform the Tokmanni Group. But the stock apears to be less risky and, when comparing its historical volatility, Wartsila Oyj Abp is 1.01 times less risky than Tokmanni Group. The stock trades about -0.06 of its potential returns per unit of risk. The Tokmanni Group Oyj is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,039  in Tokmanni Group Oyj on September 3, 2024 and sell it today you would earn a total of  143.00  from holding Tokmanni Group Oyj or generate 13.76% return on investment over 90 days.

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

Wartsila Oyj Abp  vs.  Tokmanni Group 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 latest inconsistent performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Tokmanni Group Oyj

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tokmanni Group Oyj are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward-looking signals, Tokmanni Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wartsila Oyj and Tokmanni Group

The main advantage of trading using opposite Wartsila Oyj and Tokmanni Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wartsila Oyj position performs unexpectedly, Tokmanni Group 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 Tokmanni Group will offset losses from the drop in Tokmanni Group's long position.

The idea behind Wartsila Oyj Abp and Tokmanni Group 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.