Correlation Between AS Latvijas and Altia Oyj

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

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

Diversification Opportunities for AS Latvijas and Altia Oyj

-0.88

Correlation Coefficient

AS Latvijas  Altia Oyj

Pay attention - limited upside

The 3 months correlation between UM9 and Altia is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding AS Latvijas balzams and Altia Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altia Oyj and AS Latvijas 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 AS Latvijas balzams are associated (or correlated) with Altia Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altia Oyj has no effect on the direction of AS Latvijas i.e., AS Latvijas and Altia Oyj go up and down completely randomly.

Pair Corralation between AS Latvijas and Altia Oyj

Assuming the 90 days trading horizon AS Latvijas balzams is expected to generate 0.12 times more return on investment than Altia Oyj. However, AS Latvijas balzams is 8.43 times less risky than Altia Oyj. It trades about 0.1 of its potential returns per unit of risk. Altia Oyj is currently generating about -0.24 per unit of risk. If you would invest  890.00  in AS Latvijas balzams on September 27, 2024 and sell it today you would earn a total of  15.00  from holding AS Latvijas balzams or generate 1.69% return on investment over 90 days.

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

AS Latvijas balzams  vs.  Altia Oyj

AS Latvijas balzams

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AS Latvijas balzams are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AS Latvijas is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Altia Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Altia Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with AS Latvijas and Altia Oyj

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

The idea behind AS Latvijas balzams and Altia 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.