Correlation Between BII Railway and Metso Outotec
Can any of the company-specific risk be diversified away by investing in both BII Railway 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 BII Railway and Metso Outotec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BII Railway Transportation and Metso Outotec Oyj, you can compare the effects of market volatilities on BII Railway 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 BII Railway with a short position of Metso Outotec. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and Metso Outotec.
Diversification Opportunities for BII Railway and Metso Outotec
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BII and Metso is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and Metso Outotec Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metso Outotec Oyj and BII Railway 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 BII Railway Transportation 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 Oyj has no effect on the direction of BII Railway i.e., BII Railway and Metso Outotec go up and down completely randomly.
Pair Corralation between BII Railway and Metso Outotec
Assuming the 90 days horizon BII Railway Transportation is expected to generate 0.98 times more return on investment than Metso Outotec. However, BII Railway Transportation is 1.02 times less risky than Metso Outotec. It trades about -0.09 of its potential returns per unit of risk. Metso Outotec Oyj is currently generating about -0.11 per unit of risk. If you would invest 2.65 in BII Railway Transportation on September 2, 2024 and sell it today you would lose (0.10) from holding BII Railway Transportation or give up 3.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BII Railway Transportation vs. Metso Outotec Oyj
Performance |
| Timeline |
| BII Railway Transpor |
| Metso Outotec Oyj |
BII Railway and Metso Outotec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BII Railway and Metso Outotec
The main advantage of trading using opposite BII Railway and Metso Outotec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway 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.| BII Railway vs. Superior Plus Corp | BII Railway vs. NMI Holdings | BII Railway vs. Origin Agritech | BII Railway vs. SIVERS SEMICONDUCTORS AB |
| Metso Outotec vs. SPORT LISBOA E | Metso Outotec vs. Columbia Sportswear | Metso Outotec vs. BII Railway Transportation | Metso Outotec vs. Sumitomo Mitsui Construction |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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