Correlation Between Valmet Oyj and Orion Oyj

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

By analyzing existing cross correlation between Valmet Oyj and Orion Oyj B, you can compare the effects of market volatilities on Valmet Oyj and Orion 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 Valmet Oyj with a short position of Orion Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valmet Oyj and Orion Oyj.

Diversification Opportunities for Valmet Oyj and Orion Oyj

-0.05

Correlation Coefficient

Valmet Oyj  Orion Oyj

Good diversification

The 3 months correlation between Valmet and Orion is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Valmet Oyj and Orion Oyj B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orion Oyj B 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 Orion Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orion Oyj B has no effect on the direction of Valmet Oyj i.e., Valmet Oyj and Orion Oyj go up and down completely randomly.

Pair Corralation between Valmet Oyj and Orion Oyj

Assuming the 90 days trading horizon Valmet Oyj is expected to generate 1.14 times more return on investment than Orion Oyj. However, Valmet Oyj is 1.14 times more volatile than Orion Oyj B. It trades about 0.01 of its potential returns per unit of risk. Orion Oyj B is currently generating about 0.01 per unit of risk. If you would invest  2,360  in Valmet Oyj on February 10, 2024 and sell it today you would earn a total of  52.00  from holding Valmet Oyj or generate 2.2% 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.  Orion Oyj B

Valmet Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valmet Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Valmet Oyj is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Orion Oyj B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orion Oyj B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Valmet Oyj and Orion Oyj

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

The idea behind Valmet Oyj and Orion Oyj B 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.