Correlation Between Herantis Pharma and Metsa Board
Can any of the company-specific risk be diversified away by investing in both Herantis Pharma and Metsa Board 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 Herantis Pharma and Metsa Board into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Herantis Pharma Oyj and Metsa Board Oyj, you can compare the effects of market volatilities on Herantis Pharma and Metsa Board 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 Herantis Pharma with a short position of Metsa Board. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herantis Pharma and Metsa Board.
Diversification Opportunities for Herantis Pharma and Metsa Board
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Herantis and Metsa is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Herantis Pharma Oyj and Metsa Board Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metsa Board Oyj and Herantis Pharma 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 Herantis Pharma Oyj are associated (or correlated) with Metsa Board. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metsa Board Oyj has no effect on the direction of Herantis Pharma i.e., Herantis Pharma and Metsa Board go up and down completely randomly.
Pair Corralation between Herantis Pharma and Metsa Board
Assuming the 90 days trading horizon Herantis Pharma Oyj is expected to generate 1.57 times more return on investment than Metsa Board. However, Herantis Pharma is 1.57 times more volatile than Metsa Board Oyj. It trades about -0.16 of its potential returns per unit of risk. Metsa Board Oyj is currently generating about -0.26 per unit of risk. If you would invest 143.00 in Herantis Pharma Oyj on September 2, 2024 and sell it today you would lose (15.00) from holding Herantis Pharma Oyj or give up 10.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Herantis Pharma Oyj vs. Metsa Board Oyj
Performance |
| Timeline |
| Herantis Pharma Oyj |
| Metsa Board Oyj |
Herantis Pharma and Metsa Board Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Herantis Pharma and Metsa Board
The main advantage of trading using opposite Herantis Pharma and Metsa Board positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herantis Pharma position performs unexpectedly, Metsa Board 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 Metsa Board will offset losses from the drop in Metsa Board's long position.| Herantis Pharma vs. Sampo Oyj A | Herantis Pharma vs. UPM Kymmene Oyj | Herantis Pharma vs. Wartsila Oyj Abp | Herantis Pharma vs. Elisa Oyj |
| Metsa Board vs. UPM Kymmene Oyj | Metsa Board vs. Stora Enso Oyj | Metsa Board vs. Metsa Board Oyj | Metsa Board vs. Valmet Oyj |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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