Correlation Between Kemira Oyj and Lassila Tikanoja

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

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

Diversification Opportunities for Kemira Oyj and Lassila Tikanoja

0.89

Correlation Coefficient

Kemira Oyj  Lassila Tikanoja

Very poor diversification

The 3 months correlation between Kemira and Lassila is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Kemira Oyj and Lassila Tikanoja Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lassila Tikanoja Oyj and Kemira 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 Kemira Oyj are associated (or correlated) with Lassila Tikanoja. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lassila Tikanoja Oyj has no effect on the direction of Kemira Oyj i.e., Kemira Oyj and Lassila Tikanoja go up and down completely randomly.

Pair Corralation between Kemira Oyj and Lassila Tikanoja

Assuming the 90 days trading horizon Kemira Oyj is expected to under-perform the Lassila Tikanoja. In addition to that, Kemira Oyj is 2.39 times more volatile than Lassila Tikanoja Oyj. It trades about -0.1 of its total potential returns per unit of risk. Lassila Tikanoja Oyj is currently generating about -0.23 per unit of volatility. If you would invest  895.00  in Lassila Tikanoja Oyj on September 17, 2024 and sell it today you would lose (70.00) from holding Lassila Tikanoja Oyj or give up 7.82% of portfolio value over 90 days.

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

Kemira Oyj  vs.  Lassila Tikanoja Oyj

Kemira Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kemira Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Lassila Tikanoja Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lassila Tikanoja 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.

Pair Trading with Kemira Oyj and Lassila Tikanoja

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

The idea behind Kemira Oyj and Lassila Tikanoja 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.