Correlation Between Metsa Board and SSH Communications
Can any of the company-specific risk be diversified away by investing in both Metsa Board and SSH Communications 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 SSH Communications 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 SSH Communications Security, you can compare the effects of market volatilities on Metsa Board and SSH Communications 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 SSH Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metsa Board and SSH Communications.
Diversification Opportunities for Metsa Board and SSH Communications
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Metsa and SSH is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Metsa Board Oyj and SSH Communications Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSH Communications 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 SSH Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSH Communications has no effect on the direction of Metsa Board i.e., Metsa Board and SSH Communications go up and down completely randomly.
Pair Corralation between Metsa Board and SSH Communications
Assuming the 90 days trading horizon Metsa Board Oyj is expected to under-perform the SSH Communications. But the stock apears to be less risky and, when comparing its historical volatility, Metsa Board Oyj is 1.4 times less risky than SSH Communications. The stock trades about -0.25 of its potential returns per unit of risk. The SSH Communications Security is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 132.00 in SSH Communications Security on August 28, 2024 and sell it today you would lose (27.00) from holding SSH Communications Security or give up 20.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metsa Board Oyj vs. SSH Communications Security
Performance |
| Timeline |
| Metsa Board Oyj |
| SSH Communications |
Metsa Board and SSH Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metsa Board and SSH Communications
The main advantage of trading using opposite Metsa Board and SSH Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metsa Board position performs unexpectedly, SSH Communications 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 SSH Communications will offset losses from the drop in SSH Communications' long position.The idea behind Metsa Board Oyj and SSH Communications Security 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.| SSH Communications vs. Tecnotree Oyj | SSH Communications vs. Qt Group Oyj | SSH Communications vs. Bittium Oyj | SSH Communications vs. Harvia 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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