Correlation Between Cargotec Oyj and Wartsila Oyj

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

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

Diversification Opportunities for Cargotec Oyj and Wartsila Oyj

-0.31

Correlation Coefficient

Cargotec Oyj  Wartsila Oyj

Very good diversification

The 3 months correlation between Cargotec and Wartsila is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cargotec Oyj and Wartsila Oyj Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wartsila Oyj Abp and Cargotec 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 Cargotec Oyj are associated (or correlated) with Wartsila Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wartsila Oyj Abp has no effect on the direction of Cargotec Oyj i.e., Cargotec Oyj and Wartsila Oyj go up and down completely randomly.

Pair Corralation between Cargotec Oyj and Wartsila Oyj

Assuming the 90 days trading horizon Cargotec Oyj is expected to generate 1.04 times less return on investment than Wartsila Oyj. In addition to that, Cargotec Oyj is 1.78 times more volatile than Wartsila Oyj Abp. It trades about 0.05 of its total potential returns per unit of risk. Wartsila Oyj Abp is currently generating about 0.09 per unit of volatility. If you would invest  1,188  in Wartsila Oyj Abp on September 14, 2024 and sell it today you would earn a total of  561.00  from holding Wartsila Oyj Abp or generate 47.22% return on investment over 90 days.

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

Cargotec Oyj  vs.  Wartsila Oyj Abp

Cargotec Oyj

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cargotec Oyj are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Cargotec Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Wartsila Oyj Abp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cargotec Oyj and Wartsila Oyj

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

The idea behind Cargotec Oyj and Wartsila Oyj Abp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.