Correlation Between Kesko Oyj and Herantis Pharma

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

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

Diversification Opportunities for Kesko Oyj and Herantis Pharma

-0.42

Correlation Coefficient

Kesko Oyj  Herantis Pharma

Very good diversification

The 3 months correlation between Kesko and Herantis is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Kesko Oyj and Herantis Pharma Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herantis Pharma Oyj and Kesko 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 Kesko Oyj are associated (or correlated) with Herantis Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herantis Pharma Oyj has no effect on the direction of Kesko Oyj i.e., Kesko Oyj and Herantis Pharma go up and down completely randomly.

Pair Corralation between Kesko Oyj and Herantis Pharma

Assuming the 90 days trading horizon Kesko Oyj is expected to generate 0.38 times more return on investment than Herantis Pharma. However, Kesko Oyj is 2.63 times less risky than Herantis Pharma. It trades about 0.01 of its potential returns per unit of risk. Herantis Pharma Oyj is currently generating about -0.01 per unit of risk. If you would invest  1,793  in Kesko Oyj on September 29, 2024 and sell it today you would earn a total of  37.00  from holding Kesko Oyj or generate 2.06% return on investment over 90 days.

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

Kesko Oyj  vs.  Herantis Pharma Oyj

Kesko Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

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

Herantis Pharma Oyj

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Herantis Pharma Oyj are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Herantis Pharma is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Kesko Oyj and Herantis Pharma

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

The idea behind Kesko Oyj and Herantis Pharma 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.