Correlation Between Kemira Oyj and Suominen Oyj

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Can any of the company-specific risk be diversified away by investing in both Kemira Oyj and Suominen 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 Kemira Oyj and Suominen Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kemira Oyj and Suominen Oyj, you can compare the effects of market volatilities on Kemira Oyj and Suominen 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 Kemira Oyj with a short position of Suominen Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kemira Oyj and Suominen Oyj.

Diversification Opportunities for Kemira Oyj and Suominen Oyj

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Kemira and Suominen is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Kemira Oyj and Suominen Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suominen Oyj and Kemira 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 Kemira Oyj are associated (or correlated) with Suominen Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suominen Oyj has no effect on the direction of Kemira Oyj i.e., Kemira Oyj and Suominen Oyj go up and down completely randomly.

Pair Corralation between Kemira Oyj and Suominen Oyj

Assuming the 90 days trading horizon Kemira Oyj is expected to generate 0.82 times more return on investment than Suominen Oyj. However, Kemira Oyj is 1.21 times less risky than Suominen Oyj. It trades about 0.05 of its potential returns per unit of risk. Suominen Oyj is currently generating about -0.02 per unit of risk. If you would invest  1,357  in Kemira Oyj on September 12, 2024 and sell it today you would earn a total of  592.00  from holding Kemira Oyj or generate 43.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Kemira Oyj  vs.  Suominen Oyj

 Performance 
       Timeline  
Kemira Oyj 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Kemira Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Kemira Oyj is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Suominen Oyj 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Suominen Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Kemira Oyj and Suominen Oyj Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kemira Oyj and Suominen Oyj

The main advantage of trading using opposite Kemira Oyj and Suominen Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kemira Oyj position performs unexpectedly, Suominen 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 Suominen Oyj will offset losses from the drop in Suominen Oyj's long position.
The idea behind Kemira Oyj and Suominen Oyj pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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