Correlation Between Wartsila Oyj and Sandvik AB
Can any of the company-specific risk be diversified away by investing in both Wartsila Oyj and Sandvik AB 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 Sandvik AB 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 Sandvik AB ADR, you can compare the effects of market volatilities on Wartsila Oyj and Sandvik AB 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 Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wartsila Oyj and Sandvik AB.
Diversification Opportunities for Wartsila Oyj and Sandvik AB
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wartsila and Sandvik is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Wartsila Oyj Abp and Sandvik AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB ADR 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 Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB ADR has no effect on the direction of Wartsila Oyj i.e., Wartsila Oyj and Sandvik AB go up and down completely randomly.
Pair Corralation between Wartsila Oyj and Sandvik AB
Assuming the 90 days horizon Wartsila Oyj Abp is expected to generate 2.45 times more return on investment than Sandvik AB. However, Wartsila Oyj is 2.45 times more volatile than Sandvik AB ADR. It trades about -0.02 of its potential returns per unit of risk. Sandvik AB ADR is currently generating about -0.07 per unit of risk. If you would invest 418.00 in Wartsila Oyj Abp on September 3, 2024 and sell it today you would lose (66.00) from holding Wartsila Oyj Abp or give up 15.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Wartsila Oyj Abp vs. Sandvik AB ADR
Performance |
| Timeline |
| Wartsila Oyj Abp |
| Sandvik AB ADR |
Wartsila Oyj and Sandvik AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wartsila Oyj and Sandvik AB
The main advantage of trading using opposite Wartsila Oyj and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wartsila Oyj position performs unexpectedly, Sandvik AB 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 Sandvik AB will offset losses from the drop in Sandvik AB's long position.| Wartsila Oyj vs. Sandvik AB ADR | Wartsila Oyj vs. Rockwell Automation | Wartsila Oyj vs. Park Ohio Holdings | Wartsila Oyj vs. Gates Industrial |
| Sandvik AB vs. Dear Cashmere Holding | Sandvik AB vs. Goff Corp | Sandvik AB vs. Wialan Technologies | Sandvik AB vs. Cgrowth Capital |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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