Correlation Between Tecnotree Oyj and Wartsila Oyj

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

Diversification Opportunities for Tecnotree Oyj and Wartsila Oyj

0.85

Correlation Coefficient

Tecnotree Oyj  Wartsila Oyj

Very poor diversification

The 3 months correlation between Tecnotree and Wartsila is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tecnotree Oyj and Wartsila Oyj Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wartsila Oyj Abp 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 Wartsila Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wartsila Oyj Abp has no effect on the direction of Tecnotree Oyj i.e., Tecnotree Oyj and Wartsila Oyj go up and down completely randomly.

Pair Corralation between Tecnotree Oyj and Wartsila Oyj

Assuming the 90 days trading horizon Tecnotree Oyj is expected to generate 1.86 times more return on investment than Wartsila Oyj. However, Tecnotree Oyj is 1.86 times more volatile than Wartsila Oyj Abp. It trades about 0.05 of its potential returns per unit of risk. Wartsila Oyj Abp is currently generating about 0.02 per unit of risk. If you would invest  262.00  in Tecnotree Oyj on September 30, 2024 and sell it today you would earn a total of  5.00  from holding Tecnotree Oyj or generate 1.91% return on investment over 90 days.

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

Tecnotree Oyj  vs.  Wartsila Oyj Abp

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.

Wartsila Oyj Abp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wartsila Oyj Abp 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.

Pair Trading with Tecnotree Oyj and Wartsila Oyj

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

The idea behind Tecnotree Oyj and Wartsila Oyj Abp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.