Correlation Between Wartsila Oyj and Herantis Pharma

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

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

Diversification Opportunities for Wartsila Oyj and Herantis Pharma

0.0

Correlation Coefficient

Wartsila Oyj  Herantis Pharma

Pay attention - limited upside

The 3 months correlation between Wartsila and Herantis is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Wartsila Oyj Abp and Herantis Pharma Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herantis Pharma Oyj and Wartsila 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 Wartsila Oyj Abp are associated (or correlated) with Herantis Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herantis Pharma Oyj has no effect on the direction of Wartsila Oyj i.e., Wartsila Oyj and Herantis Pharma go up and down completely randomly.

Pair Corralation between Wartsila Oyj and Herantis Pharma

Assuming the 90 days trading horizon Wartsila Oyj Abp is expected to under-perform the Herantis Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Wartsila Oyj Abp is 1.24 times less risky than Herantis Pharma. The stock trades about -0.09 of its potential returns per unit of risk. The Herantis Pharma Oyj is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  144.00  in Herantis Pharma Oyj on September 29, 2024 and sell it today you would earn a total of  5.00  from holding Herantis Pharma Oyj or generate 3.47% return on investment over 90 days.

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

Wartsila Oyj Abp  vs.  Herantis Pharma Oyj

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.

Herantis Pharma Oyj

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Herantis Pharma Oyj are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Herantis Pharma is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Wartsila Oyj and Herantis Pharma

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

The idea behind Wartsila Oyj Abp and Herantis Pharma 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.