Correlation Between Outokumpu Oyj and Telia Company

Can any of the company-specific risk be diversified away by investing in both Outokumpu Oyj and Telia Company 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 Telia Company into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Outokumpu Oyj and Telia Company AB, you can compare the effects of market volatilities on Outokumpu Oyj and Telia Company 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 Telia Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Outokumpu Oyj and Telia Company.

Diversification Opportunities for Outokumpu Oyj and Telia Company

0.11

Correlation Coefficient

Outokumpu Oyj  Telia Company

Average diversification

The 3 months correlation between Outokumpu and Telia is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Outokumpu Oyj and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company 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 Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of Outokumpu Oyj i.e., Outokumpu Oyj and Telia Company go up and down completely randomly.

Pair Corralation between Outokumpu Oyj and Telia Company

Assuming the 90 days trading horizon Outokumpu Oyj is expected to generate 0.92 times more return on investment than Telia Company. However, Outokumpu Oyj is 1.09 times less risky than Telia Company. It trades about -0.1 of its potential returns per unit of risk. Telia Company AB is currently generating about -0.22 per unit of risk. If you would invest  387.00  in Outokumpu Oyj on February 3, 2024 and sell it today you would lose (14.00) from holding Outokumpu Oyj or give up 3.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Outokumpu Oyj  vs.  Telia Company AB

Outokumpu Oyj

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Outokumpu Oyj are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Outokumpu Oyj is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Telia Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telia Company AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Telia Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Outokumpu Oyj and Telia Company

The main advantage of trading using opposite Outokumpu Oyj and Telia Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Outokumpu Oyj position performs unexpectedly, Telia Company 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 Telia Company will offset losses from the drop in Telia Company's long position.

The idea behind Outokumpu Oyj and Telia Company AB 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.