Correlation Between Metsa Board and Tokmanni Group

Can any of the company-specific risk be diversified away by investing in both Metsa Board and Tokmanni 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 Tokmanni 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 Tokmanni Group Oyj, you can compare the effects of market volatilities on Metsa Board and Tokmanni 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 Tokmanni Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metsa Board and Tokmanni Group.

Diversification Opportunities for Metsa Board and Tokmanni Group

-0.62

Correlation Coefficient

Metsa Board  Tokmanni Group

Excellent diversification

The 3 months correlation between Metsa and Tokmanni is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Metsa Board Oyj and Tokmanni Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokmanni Group Oyj 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 Tokmanni Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokmanni Group Oyj has no effect on the direction of Metsa Board i.e., Metsa Board and Tokmanni Group go up and down completely randomly.

Pair Corralation between Metsa Board and Tokmanni Group

Assuming the 90 days trading horizon Metsa Board Oyj is expected to under-perform the Tokmanni Group. But the stock apears to be less risky and, when comparing its historical volatility, Metsa Board Oyj is 1.2 times less risky than Tokmanni Group. The stock trades about -0.32 of its potential returns per unit of risk. The Tokmanni Group Oyj is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,071  in Tokmanni Group Oyj on September 28, 2024 and sell it today you would earn a total of  157.00  from holding Tokmanni Group Oyj or generate 14.66% return on investment over 90 days.

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

Metsa Board Oyj  vs.  Tokmanni Group Oyj

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.

Tokmanni Group Oyj

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tokmanni Group Oyj are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward-looking signals, Tokmanni Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metsa Board and Tokmanni Group

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

The idea behind Metsa Board Oyj and Tokmanni Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.