Correlation Between Metsa Board and Nanoform Finland

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

Diversification Opportunities for Metsa Board and Nanoform Finland

0.02
  Correlation Coefficient

Significant diversification

The 3 months correlation between Metsa and Nanoform is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Metsa Board Oyj and Nanoform Finland Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanoform Finland Plc and Metsa Board 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 Metsa Board Oyj are associated (or correlated) with Nanoform Finland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanoform Finland Plc has no effect on the direction of Metsa Board i.e., Metsa Board and Nanoform Finland go up and down completely randomly.

Pair Corralation between Metsa Board and Nanoform Finland

Assuming the 90 days trading horizon Metsa Board Oyj is expected to under-perform the Nanoform Finland. But the stock apears to be less risky and, when comparing its historical volatility, Metsa Board Oyj is 1.75 times less risky than Nanoform Finland. The stock trades about -0.04 of its potential returns per unit of risk. The Nanoform Finland Plc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  223.00  in Nanoform Finland Plc on November 19, 2024 and sell it today you would lose (104.00) from holding Nanoform Finland Plc or give up 46.64% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Metsa Board Oyj  vs.  Nanoform Finland Plc

 Performance 
       Timeline  
Metsa Board Oyj 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Metsa Board Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Metsa Board is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
Nanoform Finland Plc 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Nanoform Finland Plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nanoform Finland is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Metsa Board and Nanoform Finland Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Metsa Board and Nanoform Finland

The main advantage of trading using opposite Metsa Board and Nanoform Finland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metsa Board position performs unexpectedly, Nanoform Finland 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 Nanoform Finland will offset losses from the drop in Nanoform Finland's long position.
The idea behind Metsa Board Oyj and Nanoform Finland Plc 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.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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