Correlation Between YIT Oyj and Outokumpu Oyj
Can any of the company-specific risk be diversified away by investing in both YIT Oyj and Outokumpu 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 YIT Oyj and Outokumpu Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between YIT Oyj and Outokumpu Oyj, you can compare the effects of market volatilities on YIT Oyj and Outokumpu 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 YIT Oyj with a short position of Outokumpu Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of YIT Oyj and Outokumpu Oyj.
Diversification Opportunities for YIT Oyj and Outokumpu Oyj
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between YIT and Outokumpu is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding YIT Oyj and Outokumpu Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outokumpu Oyj and YIT 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 YIT Oyj are associated (or correlated) with Outokumpu Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outokumpu Oyj has no effect on the direction of YIT Oyj i.e., YIT Oyj and Outokumpu Oyj go up and down completely randomly.
Pair Corralation between YIT Oyj and Outokumpu Oyj
Assuming the 90 days trading horizon YIT Oyj is expected to under-perform the Outokumpu Oyj. In addition to that, YIT Oyj is 1.43 times more volatile than Outokumpu Oyj. It trades about -0.18 of its total potential returns per unit of risk. Outokumpu Oyj is currently generating about -0.1 per unit of volatility. If you would invest 329.00 in Outokumpu Oyj on September 1, 2024 and sell it today you would lose (11.00) from holding Outokumpu Oyj or give up 3.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
YIT Oyj vs. Outokumpu Oyj
Performance |
| Timeline |
| YIT Oyj |
| Outokumpu Oyj |
YIT Oyj and Outokumpu Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with YIT Oyj and Outokumpu Oyj
The main advantage of trading using opposite YIT Oyj and Outokumpu Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YIT Oyj position performs unexpectedly, Outokumpu 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 Outokumpu Oyj will offset losses from the drop in Outokumpu Oyj's long position.The idea behind YIT Oyj and Outokumpu 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.| Outokumpu Oyj vs. Nordea Bank Abp | Outokumpu Oyj vs. Fortum Oyj | Outokumpu Oyj vs. Wartsila Oyj Abp | Outokumpu 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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