Correlation Between Wartsila Oyj and SSAB AB

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

Diversification Opportunities for Wartsila Oyj and SSAB AB

0.04

Correlation Coefficient

Wartsila Oyj  SSAB AB

Significant diversification

The 3 months correlation between Wartsila and SSAB is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Wartsila Oyj Abp and SSAB AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSAB AB ser 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 SSAB AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSAB AB ser has no effect on the direction of Wartsila Oyj i.e., Wartsila Oyj and SSAB AB go up and down completely randomly.

Pair Corralation between Wartsila Oyj and SSAB AB

Assuming the 90 days trading horizon Wartsila Oyj Abp is expected to under-perform the SSAB AB. But the stock apears to be less risky and, when comparing its historical volatility, Wartsila Oyj Abp is 1.11 times less risky than SSAB AB. The stock trades about -0.03 of its potential returns per unit of risk. The SSAB AB ser is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  412.00  in SSAB AB ser on September 15, 2024 and sell it today you would earn a total of  5.00  from holding SSAB AB ser or generate 1.21% return on investment over 90 days.

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

Wartsila Oyj Abp  vs.  SSAB AB ser

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 fairly strong technical indicators, Wartsila Oyj is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

SSAB AB ser

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SSAB AB ser are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SSAB AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wartsila Oyj and SSAB AB

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

The idea behind Wartsila Oyj Abp and SSAB AB ser 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 Stocks Directory module to find actively traded stocks across global markets.