Correlation Between Outokumpu Oyj and Valmet Oyj
Can any of the company-specific risk be diversified away by investing in both Outokumpu 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 Outokumpu 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 Outokumpu Oyj and Valmet Oyj, you can compare the effects of market volatilities on Outokumpu 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 Outokumpu Oyj with a short position of Valmet Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Outokumpu Oyj and Valmet Oyj.
Diversification Opportunities for Outokumpu Oyj and Valmet Oyj
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Outokumpu and Valmet is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Outokumpu Oyj and Valmet Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmet Oyj and Outokumpu 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 Outokumpu 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 Outokumpu Oyj i.e., Outokumpu Oyj and Valmet Oyj go up and down completely randomly.
Pair Corralation between Outokumpu Oyj and Valmet Oyj
Assuming the 90 days trading horizon Outokumpu Oyj is expected to under-perform the Valmet Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Outokumpu Oyj is 1.19 times less risky than Valmet Oyj. The stock trades about -0.05 of its potential returns per unit of risk. The Valmet Oyj is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,348 in Valmet Oyj on August 28, 2024 and sell it today you would lose (123.00) from holding Valmet Oyj or give up 5.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Outokumpu Oyj vs. Valmet Oyj
Performance |
| Timeline |
| Outokumpu Oyj |
| Valmet Oyj |
Outokumpu Oyj and Valmet Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Outokumpu Oyj and Valmet Oyj
The main advantage of trading using opposite Outokumpu Oyj and Valmet Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Outokumpu 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 Outokumpu 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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