Correlation Between VOLVO B and Metso Outotec

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

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

Diversification Opportunities for VOLVO B and Metso Outotec

0.35

Correlation Coefficient

VOLVO B  Metso Outotec

Weak diversification

The 3 months correlation between VOLVO and Metso is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding VOLVO B UNSPADR and Metso Outotec Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metso Outotec Oyj and VOLVO B 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 VOLVO B UNSPADR are associated (or correlated) with Metso Outotec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metso Outotec Oyj has no effect on the direction of VOLVO B i.e., VOLVO B and Metso Outotec go up and down completely randomly.

Pair Corralation between VOLVO B and Metso Outotec

Assuming the 90 days trading horizon VOLVO B is expected to generate 10.72 times less return on investment than Metso Outotec. In addition to that, VOLVO B is 1.19 times more volatile than Metso Outotec Oyj. It trades about 0.02 of its total potential returns per unit of risk. Metso Outotec Oyj is currently generating about 0.3 per unit of volatility. If you would invest  841.00  in Metso Outotec Oyj on April 20, 2025 and sell it today you would earn a total of  313.00  from holding Metso Outotec Oyj or generate 37.22% return on investment over 90 days.

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

VOLVO B UNSPADR  vs.  Metso Outotec Oyj

VOLVO B UNSPADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VOLVO B UNSPADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, VOLVO B is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 23 (%) 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.

Pair Trading with VOLVO B and Metso Outotec

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

The idea behind VOLVO B UNSPADR and Metso Outotec 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.