Correlation Between Metso Oyj and Reka Industrial
Can any of the company-specific risk be diversified away by investing in both Metso Oyj and Reka Industrial 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 Metso Oyj and Reka Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metso Oyj and Reka Industrial Oyj, you can compare the effects of market volatilities on Metso Oyj and Reka Industrial 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 Metso Oyj with a short position of Reka Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metso Oyj and Reka Industrial.
Diversification Opportunities for Metso Oyj and Reka Industrial
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Metso and Reka is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Metso Oyj and Reka Industrial Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reka Industrial Oyj and Metso 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 Metso Oyj are associated (or correlated) with Reka Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reka Industrial Oyj has no effect on the direction of Metso Oyj i.e., Metso Oyj and Reka Industrial go up and down completely randomly.
Pair Corralation between Metso Oyj and Reka Industrial
Assuming the 90 days trading horizon Metso Oyj is expected to under-perform the Reka Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Metso Oyj is 1.18 times less risky than Reka Industrial. The stock trades about -0.21 of its potential returns per unit of risk. The Reka Industrial Oyj is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 495.00 in Reka Industrial Oyj on August 27, 2024 and sell it today you would lose (19.00) from holding Reka Industrial Oyj or give up 3.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metso Oyj vs. Reka Industrial Oyj
Performance |
| Timeline |
| Metso Oyj |
| Reka Industrial Oyj |
Metso Oyj and Reka Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metso Oyj and Reka Industrial
The main advantage of trading using opposite Metso Oyj and Reka Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metso Oyj position performs unexpectedly, Reka Industrial 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 Reka Industrial will offset losses from the drop in Reka Industrial's long position.The idea behind Metso Oyj and Reka Industrial 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.| Reka Industrial vs. Oma Saastopankki Oyj | Reka Industrial vs. Optomed PLC | Reka Industrial vs. Aspocomp Group Oyj | Reka Industrial vs. Tecnotree 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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