Correlation Between Terveystalo and Optomed PLC

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

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

Diversification Opportunities for Terveystalo and Optomed PLC

-0.38

Correlation Coefficient

Terveystalo  Optomed PLC

Very good diversification

The 3 months correlation between Terveystalo and Optomed is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Terveystalo Oy and Optomed PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optomed PLC and Terveystalo 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 Terveystalo Oy are associated (or correlated) with Optomed PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optomed PLC has no effect on the direction of Terveystalo i.e., Terveystalo and Optomed PLC go up and down completely randomly.

Pair Corralation between Terveystalo and Optomed PLC

Assuming the 90 days trading horizon Terveystalo is expected to generate 1.44 times less return on investment than Optomed PLC. But when comparing it to its historical volatility, Terveystalo Oy is 2.72 times less risky than Optomed PLC. It trades about 0.11 of its potential returns per unit of risk. Optomed PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  421.00  in Optomed PLC on September 13, 2024 and sell it today you would earn a total of  31.00  from holding Optomed PLC or generate 7.36% return on investment over 90 days.

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

Terveystalo Oy  vs.  Optomed PLC

Terveystalo Oy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Terveystalo Oy are ranked lower than 9 (%) 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.

Optomed PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optomed PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Optomed PLC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Terveystalo and Optomed PLC

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

The idea behind Terveystalo Oy and Optomed 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.