Correlation Between Wartsila Oyj and Nokian Renkaat
Can any of the company-specific risk be diversified away by investing in both Wartsila Oyj and Nokian Renkaat 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 Wartsila Oyj and Nokian Renkaat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wartsila Oyj Abp and Nokian Renkaat Oyj, you can compare the effects of market volatilities on Wartsila Oyj and Nokian Renkaat 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 Wartsila Oyj with a short position of Nokian Renkaat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wartsila Oyj and Nokian Renkaat.
Diversification Opportunities for Wartsila Oyj and Nokian Renkaat
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wartsila and Nokian is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Wartsila Oyj Abp and Nokian Renkaat Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokian Renkaat Oyj and Wartsila 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 Wartsila Oyj Abp are associated (or correlated) with Nokian Renkaat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokian Renkaat Oyj has no effect on the direction of Wartsila Oyj i.e., Wartsila Oyj and Nokian Renkaat go up and down completely randomly.
Pair Corralation between Wartsila Oyj and Nokian Renkaat
Assuming the 90 days trading horizon Wartsila Oyj Abp is expected to generate 0.96 times more return on investment than Nokian Renkaat. However, Wartsila Oyj Abp is 1.04 times less risky than Nokian Renkaat. It trades about 0.09 of its potential returns per unit of risk. Nokian Renkaat Oyj is currently generating about -0.01 per unit of risk. If you would invest 780.00 in Wartsila Oyj Abp on August 27, 2024 and sell it today you would earn a total of 1,003 from holding Wartsila Oyj Abp or generate 128.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wartsila Oyj Abp vs. Nokian Renkaat Oyj
Performance |
| Timeline |
| Wartsila Oyj Abp |
| Nokian Renkaat Oyj |
Wartsila Oyj and Nokian Renkaat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wartsila Oyj and Nokian Renkaat
The main advantage of trading using opposite Wartsila Oyj and Nokian Renkaat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wartsila Oyj position performs unexpectedly, Nokian Renkaat 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 Nokian Renkaat will offset losses from the drop in Nokian Renkaat's long position.| Wartsila Oyj vs. Aktia Bank Abp | Wartsila Oyj vs. Alandsbanken Abp B | Wartsila Oyj vs. Alandsbanken Abp A | Wartsila Oyj vs. Sampo Oyj A |
| Nokian Renkaat vs. Fortum Oyj | Nokian Renkaat vs. Sampo Oyj A | Nokian Renkaat vs. Nordea Bank Abp | Nokian Renkaat vs. Wartsila Oyj Abp |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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