Correlation Between Elisa Oyj and Valmet Oyj
Can any of the company-specific risk be diversified away by investing in both Elisa Oyj and Valmet 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 Elisa Oyj and Valmet Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elisa Oyj and Valmet Oyj, you can compare the effects of market volatilities on Elisa Oyj and Valmet 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 Elisa Oyj with a short position of Valmet Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elisa Oyj and Valmet Oyj.
Diversification Opportunities for Elisa Oyj and Valmet Oyj
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Elisa and Valmet is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Elisa Oyj and Valmet Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmet Oyj and Elisa 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 Elisa Oyj are associated (or correlated) with Valmet Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valmet Oyj has no effect on the direction of Elisa Oyj i.e., Elisa Oyj and Valmet Oyj go up and down completely randomly.
Pair Corralation between Elisa Oyj and Valmet Oyj
Assuming the 90 days trading horizon Elisa Oyj is expected to generate 0.57 times more return on investment than Valmet Oyj. However, Elisa Oyj is 1.76 times less risky than Valmet Oyj. It trades about -0.02 of its potential returns per unit of risk. Valmet Oyj is currently generating about -0.02 per unit of risk. If you would invest 4,843 in Elisa Oyj on August 31, 2024 and sell it today you would lose (519.00) from holding Elisa Oyj or give up 10.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elisa Oyj vs. Valmet Oyj
Performance |
| Timeline |
| Elisa Oyj |
| Valmet Oyj |
Elisa Oyj and Valmet Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elisa Oyj and Valmet Oyj
The main advantage of trading using opposite Elisa Oyj and Valmet Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elisa Oyj position performs unexpectedly, Valmet 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 Valmet Oyj will offset losses from the drop in Valmet Oyj's long position.| Elisa Oyj vs. Kesko Oyj | Elisa Oyj vs. Sampo Oyj A | Elisa Oyj vs. UPM Kymmene Oyj | Elisa Oyj vs. Orion Oyj B |
| Valmet Oyj vs. UPM Kymmene Oyj | Valmet Oyj vs. Wartsila Oyj Abp | Valmet Oyj vs. Sampo Oyj A | Valmet Oyj vs. Konecranes Plc |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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