Correlation Between Kemira Oyj and Valmet Oyj
Can any of the company-specific risk be diversified away by investing in both Kemira 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 Kemira 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 Kemira Oyj and Valmet Oyj, you can compare the effects of market volatilities on Kemira 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 Kemira Oyj with a short position of Valmet Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kemira Oyj and Valmet Oyj.
Diversification Opportunities for Kemira Oyj and Valmet Oyj
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kemira and Valmet is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Kemira Oyj and Valmet Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmet 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 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 Kemira Oyj i.e., Kemira Oyj and Valmet Oyj go up and down completely randomly.
Pair Corralation between Kemira Oyj and Valmet Oyj
Assuming the 90 days trading horizon Kemira Oyj is expected to under-perform the Valmet Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Kemira Oyj is 1.03 times less risky than Valmet Oyj. The stock trades about -0.31 of its potential returns per unit of risk. The Valmet Oyj is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest 2,439 in Valmet Oyj on August 28, 2024 and sell it today you would lose (220.00) from holding Valmet Oyj or give up 9.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kemira Oyj vs. Valmet Oyj
Performance |
| Timeline |
| Kemira Oyj |
| Valmet Oyj |
Kemira Oyj and Valmet Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kemira Oyj and Valmet Oyj
The main advantage of trading using opposite Kemira Oyj and Valmet Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kemira 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.The idea behind Kemira Oyj and Valmet 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.| Valmet Oyj vs. Aktia Bank Abp | Valmet Oyj vs. Alandsbanken Abp B | Valmet Oyj vs. Alandsbanken Abp A | Valmet Oyj vs. Sampo Oyj A |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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