Correlation Between Metsa Board and Enento Group

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

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

Diversification Opportunities for Metsa Board and Enento Group

0.65

Correlation Coefficient

Metsa Board  Enento Group

Poor diversification

The 3 months correlation between Metsa and Enento is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Metsa Board Oyj and Enento Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enento Group Plc and Metsa Board 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 Metsa Board Oyj are associated (or correlated) with Enento Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enento Group Plc has no effect on the direction of Metsa Board i.e., Metsa Board and Enento Group go up and down completely randomly.

Pair Corralation between Metsa Board and Enento Group

Assuming the 90 days trading horizon Metsa Board Oyj is expected to under-perform the Enento Group. In addition to that, Metsa Board is 1.31 times more volatile than Enento Group Plc. It trades about -0.32 of its total potential returns per unit of risk. Enento Group Plc is currently generating about -0.1 per unit of volatility. If you would invest  1,887  in Enento Group Plc on September 28, 2024 and sell it today you would lose (175.00) from holding Enento Group Plc or give up 9.27% of portfolio value over 90 days.

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

Metsa Board Oyj  vs.  Enento Group Plc

Metsa Board Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metsa Board Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent 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.

Enento Group Plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Metsa Board and Enento Group

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

The idea behind Metsa Board Oyj and Enento Group Plc 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.