Correlation Between Detection Technology and Tecnotree Oyj

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

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

Diversification Opportunities for Detection Technology and Tecnotree Oyj

0.66

Correlation Coefficient

Detection Technology  Tecnotree Oyj

Poor diversification

The 3 months correlation between Detection and Tecnotree is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Detection Technology OY and Tecnotree Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tecnotree Oyj and Detection Technology 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 Detection Technology OY are associated (or correlated) with Tecnotree Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tecnotree Oyj has no effect on the direction of Detection Technology i.e., Detection Technology and Tecnotree Oyj go up and down completely randomly.

Pair Corralation between Detection Technology and Tecnotree Oyj

Assuming the 90 days trading horizon Detection Technology OY is expected to under-perform the Tecnotree Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Detection Technology OY is 1.25 times less risky than Tecnotree Oyj. The stock trades about -0.24 of its potential returns per unit of risk. The Tecnotree Oyj is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  327.00  in Tecnotree Oyj on September 13, 2024 and sell it today you would lose (63.00) from holding Tecnotree Oyj or give up 19.27% of portfolio value over 90 days.

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

Detection Technology OY  vs.  Tecnotree Oyj

Detection Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Detection Technology OY 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 technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Tecnotree Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tecnotree Oyj 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 technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Detection Technology and Tecnotree Oyj

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

The idea behind Detection Technology OY and Tecnotree 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.