Correlation Between Wartsila Oyj and Terveystalo

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

Diversification Opportunities for Wartsila Oyj and Terveystalo

-0.37

Correlation Coefficient

Wartsila Oyj  Terveystalo

Very good diversification

The 3 months correlation between Wartsila and Terveystalo is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Wartsila Oyj Abp and Terveystalo Oy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terveystalo Oy 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 Terveystalo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terveystalo Oy has no effect on the direction of Wartsila Oyj i.e., Wartsila Oyj and Terveystalo go up and down completely randomly.

Pair Corralation between Wartsila Oyj and Terveystalo

Assuming the 90 days trading horizon Wartsila Oyj Abp is expected to under-perform the Terveystalo. In addition to that, Wartsila Oyj is 1.46 times more volatile than Terveystalo Oy. It trades about -0.11 of its total potential returns per unit of risk. Terveystalo Oy is currently generating about 0.17 per unit of volatility. If you would invest  932.00  in Terveystalo Oy on October 5, 2024 and sell it today you would earn a total of  148.00  from holding Terveystalo Oy or generate 15.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Wartsila Oyj Abp  vs.  Terveystalo Oy

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.

Terveystalo Oy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Terveystalo Oy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Terveystalo demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wartsila Oyj and Terveystalo

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

The idea behind Wartsila Oyj Abp and Terveystalo Oy 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.