Correlation Between EQ Oyj and Talenom Oyj

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

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

Diversification Opportunities for EQ Oyj and Talenom Oyj

0.75

Correlation Coefficient

EQ Oyj  Talenom Oyj

Poor diversification

The 3 months correlation between EQV1V and Talenom is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding eQ Oyj and Talenom Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talenom Oyj and EQ 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 eQ Oyj are associated (or correlated) with Talenom Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talenom Oyj has no effect on the direction of EQ Oyj i.e., EQ Oyj and Talenom Oyj go up and down completely randomly.

Pair Corralation between EQ Oyj and Talenom Oyj

Assuming the 90 days trading horizon eQ Oyj is expected to generate 0.41 times more return on investment than Talenom Oyj. However, eQ Oyj is 2.45 times less risky than Talenom Oyj. It trades about -0.15 of its potential returns per unit of risk. Talenom Oyj is currently generating about -0.2 per unit of risk. If you would invest  1,375  in eQ Oyj on September 17, 2024 and sell it today you would lose (130.00) from holding eQ Oyj or give up 9.45% of portfolio value over 90 days.

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

eQ Oyj  vs.  Talenom Oyj

eQ Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days eQ Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Talenom Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talenom Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with EQ Oyj and Talenom Oyj

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

The idea behind eQ Oyj and Talenom 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.