Correlation Between Tecnotree Oyj and Kempower Oyj

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

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

Diversification Opportunities for Tecnotree Oyj and Kempower Oyj

0.84

Correlation Coefficient

Tecnotree Oyj  Kempower Oyj

Very poor diversification

The 3 months correlation between Tecnotree and Kempower is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Tecnotree Oyj and Kempower Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kempower Oyj and Tecnotree 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 Tecnotree Oyj are associated (or correlated) with Kempower Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kempower Oyj has no effect on the direction of Tecnotree Oyj i.e., Tecnotree Oyj and Kempower Oyj go up and down completely randomly.

Pair Corralation between Tecnotree Oyj and Kempower Oyj

Assuming the 90 days trading horizon Tecnotree Oyj is expected to under-perform the Kempower Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Tecnotree Oyj is 1.14 times less risky than Kempower Oyj. The stock trades about -0.17 of its potential returns per unit of risk. The Kempower Oyj is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,074  in Kempower Oyj on September 17, 2024 and sell it today you would lose (183.00) from holding Kempower Oyj or give up 17.04% of portfolio value over 90 days.

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

Tecnotree Oyj  vs.  Kempower Oyj

Tecnotree Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kempower Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kempower Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Tecnotree Oyj and Kempower Oyj

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

The idea behind Tecnotree Oyj and Kempower 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.