Correlation Between Metsa Board and Terveystalo

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

Diversification Opportunities for Metsa Board and Terveystalo

-0.62

Correlation Coefficient

Metsa Board  Terveystalo

Excellent diversification

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

Pair Corralation between Metsa Board and Terveystalo

Assuming the 90 days trading horizon Metsa Board Oyj is expected to under-perform the Terveystalo. In addition to that, Metsa Board is 1.11 times more volatile than Terveystalo Oy. It trades about -0.05 of its total potential returns per unit of risk. Terveystalo Oy is currently generating about 0.08 per unit of volatility. If you would invest  585.00  in Terveystalo Oy on September 28, 2024 and sell it today you would earn a total of  461.00  from holding Terveystalo Oy or generate 78.8% 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.  Terveystalo Oy

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.

Terveystalo Oy

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Terveystalo Oy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Terveystalo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Metsa Board and Terveystalo

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

The idea behind Metsa Board Oyj and Terveystalo Oy 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.