Correlation Between Associated British and Metso Outotec
Can any of the company-specific risk be diversified away by investing in both Associated British and Metso Outotec 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 Associated British and Metso Outotec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Metso Outotec Corp, you can compare the effects of market volatilities on Associated British and Metso Outotec 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 Associated British with a short position of Metso Outotec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Metso Outotec.
Diversification Opportunities for Associated British and Metso Outotec
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Associated and Metso is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Metso Outotec Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metso Outotec Corp and Associated British 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 Associated British Foods are associated (or correlated) with Metso Outotec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metso Outotec Corp has no effect on the direction of Associated British i.e., Associated British and Metso Outotec go up and down completely randomly.
Pair Corralation between Associated British and Metso Outotec
Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the Metso Outotec. But the stock apears to be less risky and, when comparing its historical volatility, Associated British Foods is 1.4 times less risky than Metso Outotec. The stock trades about -0.01 of its potential returns per unit of risk. The Metso Outotec Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 868.00 in Metso Outotec Corp on September 4, 2024 and sell it today you would lose (30.00) from holding Metso Outotec Corp or give up 3.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Metso Outotec Corp
Performance |
| Timeline |
| Associated British Foods |
| Metso Outotec Corp |
Associated British and Metso Outotec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Metso Outotec
The main advantage of trading using opposite Associated British and Metso Outotec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Metso Outotec 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 Metso Outotec will offset losses from the drop in Metso Outotec's long position.| Associated British vs. Samsung Electronics Co | Associated British vs. Samsung Electronics Co | Associated British vs. Hyundai Motor | Associated British vs. Toyota Motor Corp |
| Metso Outotec vs. Telecom Italia SpA | Metso Outotec vs. Associated British Foods | Metso Outotec vs. Leroy Seafood Group | Metso Outotec vs. Roebuck Food Group |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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