Correlation Between Metso Outotec and Bannerman Resources

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

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

Diversification Opportunities for Metso Outotec and Bannerman Resources

0.68

Correlation Coefficient

Metso Outotec  Bannerman Resources

Poor diversification

The 3 months correlation between Metso and Bannerman is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Metso Outotec Oyj and Bannerman Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bannerman Resources and Metso Outotec 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 Metso Outotec Oyj are associated (or correlated) with Bannerman Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bannerman Resources has no effect on the direction of Metso Outotec i.e., Metso Outotec and Bannerman Resources go up and down completely randomly.

Pair Corralation between Metso Outotec and Bannerman Resources

Assuming the 90 days horizon Metso Outotec is expected to generate 1.61 times less return on investment than Bannerman Resources. But when comparing it to its historical volatility, Metso Outotec Oyj is 3.46 times less risky than Bannerman Resources. It trades about 0.28 of its potential returns per unit of risk. Bannerman Resources Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  112.00  in Bannerman Resources Limited on April 23, 2025 and sell it today you would earn a total of  52.00  from holding Bannerman Resources Limited or generate 46.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Metso Outotec Oyj  vs.  Bannerman Resources Limited

Metso Outotec Oyj

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metso Outotec Oyj are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Metso Outotec reported solid returns over the last few months and may actually be approaching a breakup point.

Bannerman Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bannerman Resources Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bannerman Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metso Outotec and Bannerman Resources

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

The idea behind Metso Outotec Oyj and Bannerman Resources Limited 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.