Correlation Between Metso Oyj and Bittium Oyj

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

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

Diversification Opportunities for Metso Oyj and Bittium Oyj

0.83

Correlation Coefficient

Metso Oyj  Bittium Oyj

Very poor diversification

The 3 months correlation between Metso and Bittium is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Metso Oyj and Bittium Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bittium Oyj and Metso 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 Metso Oyj are associated (or correlated) with Bittium Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bittium Oyj has no effect on the direction of Metso Oyj i.e., Metso Oyj and Bittium Oyj go up and down completely randomly.

Pair Corralation between Metso Oyj and Bittium Oyj

Assuming the 90 days trading horizon Metso Oyj is expected to generate 0.89 times more return on investment than Bittium Oyj. However, Metso Oyj is 1.12 times less risky than Bittium Oyj. It trades about 0.05 of its potential returns per unit of risk. Bittium Oyj is currently generating about 0.03 per unit of risk. If you would invest  728.00  in Metso Oyj on February 4, 2024 and sell it today you would earn a total of  347.00  from holding Metso Oyj or generate 47.66% return on investment over 90 days.

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

Metso Oyj  vs.  Bittium Oyj

Metso Oyj

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metso Oyj are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Metso Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Bittium Oyj

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bittium Oyj are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Bittium Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metso Oyj and Bittium Oyj

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

The idea behind Metso Oyj and Bittium 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.