Correlation Between Huhtamaki Oyj and Kemira Oyj

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

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

Diversification Opportunities for Huhtamaki Oyj and Kemira Oyj

-0.11

Correlation Coefficient

Huhtamaki Oyj  Kemira Oyj

Good diversification

The 3 months correlation between Huhtamaki and Kemira is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Huhtamaki Oyj and Kemira Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kemira Oyj and Huhtamaki 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 Huhtamaki Oyj are associated (or correlated) with Kemira Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kemira Oyj has no effect on the direction of Huhtamaki Oyj i.e., Huhtamaki Oyj and Kemira Oyj go up and down completely randomly.

Pair Corralation between Huhtamaki Oyj and Kemira Oyj

Assuming the 90 days trading horizon Huhtamaki Oyj is expected to generate 4.14 times less return on investment than Kemira Oyj. But when comparing it to its historical volatility, Huhtamaki Oyj is 1.21 times less risky than Kemira Oyj. It trades about 0.02 of its potential returns per unit of risk. Kemira Oyj is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,096  in Kemira Oyj on January 31, 2024 and sell it today you would earn a total of  948.00  from holding Kemira Oyj or generate 86.5% return on investment over 90 days.

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

Huhtamaki Oyj  vs.  Kemira Oyj

Huhtamaki Oyj

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Huhtamaki Oyj are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Huhtamaki Oyj is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Kemira Oyj

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kemira Oyj are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Kemira Oyj sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huhtamaki Oyj and Kemira Oyj

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

The idea behind Huhtamaki Oyj and Kemira 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.