Correlation Between Orion Oyj and Alandsbanken Abp

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

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

Diversification Opportunities for Orion Oyj and Alandsbanken Abp

-0.23

Correlation Coefficient

Orion Oyj  Alandsbanken Abp

Very good diversification

The 3 months correlation between Orion and Alandsbanken is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Orion Oyj A and Alandsbanken Abp B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alandsbanken Abp B and Orion 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 Orion Oyj A are associated (or correlated) with Alandsbanken Abp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alandsbanken Abp B has no effect on the direction of Orion Oyj i.e., Orion Oyj and Alandsbanken Abp go up and down completely randomly.

Pair Corralation between Orion Oyj and Alandsbanken Abp

Assuming the 90 days trading horizon Orion Oyj is expected to generate 7.91 times less return on investment than Alandsbanken Abp. In addition to that, Orion Oyj is 1.03 times more volatile than Alandsbanken Abp B. It trades about 0.01 of its total potential returns per unit of risk. Alandsbanken Abp B is currently generating about 0.07 per unit of volatility. If you would invest  2,919  in Alandsbanken Abp B on February 4, 2024 and sell it today you would earn a total of  381.00  from holding Alandsbanken Abp B or generate 13.05% return on investment over 90 days.

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

Orion Oyj A  vs.  Alandsbanken Abp B

Orion Oyj A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orion Oyj A 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 basic indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Alandsbanken Abp B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alandsbanken Abp B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Alandsbanken Abp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Orion Oyj and Alandsbanken Abp

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

The idea behind Orion Oyj A and Alandsbanken Abp B 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.