Correlation Between Afarak Group and Outokumpu Oyj
Can any of the company-specific risk be diversified away by investing in both Afarak Group and Outokumpu Oyj 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 Afarak Group and Outokumpu Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Afarak Group Oyj and Outokumpu Oyj, you can compare the effects of market volatilities on Afarak Group and Outokumpu Oyj 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 Afarak Group with a short position of Outokumpu Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Afarak Group and Outokumpu Oyj.
Diversification Opportunities for Afarak Group and Outokumpu Oyj
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Afarak and Outokumpu is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Afarak Group Oyj and Outokumpu Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outokumpu Oyj and Afarak Group 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 Afarak Group Oyj are associated (or correlated) with Outokumpu Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outokumpu Oyj has no effect on the direction of Afarak Group i.e., Afarak Group and Outokumpu Oyj go up and down completely randomly.
Pair Corralation between Afarak Group and Outokumpu Oyj
Assuming the 90 days trading horizon Afarak Group Oyj is expected to under-perform the Outokumpu Oyj. In addition to that, Afarak Group is 1.74 times more volatile than Outokumpu Oyj. It trades about -0.07 of its total potential returns per unit of risk. Outokumpu Oyj is currently generating about -0.07 per unit of volatility. If you would invest 504.00 in Outokumpu Oyj on September 1, 2024 and sell it today you would lose (186.00) from holding Outokumpu Oyj or give up 36.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Afarak Group Oyj vs. Outokumpu Oyj
Performance |
| Timeline |
| Afarak Group Oyj |
| Outokumpu Oyj |
Afarak Group and Outokumpu Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Afarak Group and Outokumpu Oyj
The main advantage of trading using opposite Afarak Group and Outokumpu Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Afarak Group position performs unexpectedly, Outokumpu Oyj 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 Outokumpu Oyj will offset losses from the drop in Outokumpu Oyj's long position.| Afarak Group vs. Outokumpu Oyj | Afarak Group vs. Sotkamo Silver AB | Afarak Group vs. SSAB AB ser | Afarak Group vs. Bittium Oyj |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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