Correlation Between Valmet Oyj and Tokmanni Group
Can any of the company-specific risk be diversified away by investing in both Valmet Oyj and Tokmanni Group 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 Valmet Oyj and Tokmanni Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valmet Oyj and Tokmanni Group Oyj, you can compare the effects of market volatilities on Valmet Oyj and Tokmanni Group 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 Valmet Oyj with a short position of Tokmanni Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valmet Oyj and Tokmanni Group.
Diversification Opportunities for Valmet Oyj and Tokmanni Group
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Valmet and Tokmanni is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Valmet Oyj and Tokmanni Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokmanni Group Oyj and Valmet 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 Valmet Oyj are associated (or correlated) with Tokmanni Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokmanni Group Oyj has no effect on the direction of Valmet Oyj i.e., Valmet Oyj and Tokmanni Group go up and down completely randomly.
Pair Corralation between Valmet Oyj and Tokmanni Group
Assuming the 90 days trading horizon Valmet Oyj is expected to under-perform the Tokmanni Group. But the stock apears to be less risky and, when comparing its historical volatility, Valmet Oyj is 2.56 times less risky than Tokmanni Group. The stock trades about -0.26 of its potential returns per unit of risk. The Tokmanni Group Oyj is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,024 in Tokmanni Group Oyj on August 31, 2024 and sell it today you would earn a total of 168.00 from holding Tokmanni Group Oyj or generate 16.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valmet Oyj vs. Tokmanni Group Oyj
Performance |
| Timeline |
| Valmet Oyj |
| Tokmanni Group Oyj |
Valmet Oyj and Tokmanni Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valmet Oyj and Tokmanni Group
The main advantage of trading using opposite Valmet Oyj and Tokmanni Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valmet Oyj position performs unexpectedly, Tokmanni Group 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 Tokmanni Group will offset losses from the drop in Tokmanni Group's long position.| Valmet Oyj vs. UPM Kymmene Oyj | Valmet Oyj vs. Wartsila Oyj Abp | Valmet Oyj vs. Sampo Oyj A | Valmet Oyj vs. Konecranes Plc |
| Tokmanni Group vs. Sampo Oyj A | Tokmanni Group vs. Harvia Oyj | Tokmanni Group vs. Nordea Bank Abp | Tokmanni Group vs. Fortum 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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