Can any of the company-specific risk be diversified away by investing in both Elisa Oyj and Orion 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 Elisa Oyj and Orion Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elisa Oyj and Orion Oyj A, you can compare the effects of market volatilities on Elisa Oyj and Orion 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 Elisa Oyj with a short position of Orion Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elisa Oyj and Orion Oyj.
Diversification Opportunities for Elisa Oyj and Orion Oyj
The 3 months correlation between Elisa and Orion is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Elisa Oyj and Orion Oyj A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orion Oyj A and Elisa 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 Elisa Oyj are associated (or correlated) with Orion Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orion Oyj A has no effect on the direction of Elisa Oyj i.e., Elisa Oyj and Orion Oyj go up and down completely randomly.
Assuming the 90 days trading horizon Elisa Oyj is expected to generate 2.64 times less return on investment than Orion Oyj. But when comparing it to its historical volatility, Elisa Oyj is 1.47 times less risky than Orion Oyj. It trades about 0.14 of its potential returns per unit of risk. Orion Oyj A is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3,605 in Orion Oyj A on March 6, 2024 and sell it today you would earn a total of 240.00 from holding Orion Oyj A or generate 6.66% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Elisa Oyj are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Elisa Oyj is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.
Compared to the overall equity markets, risk-adjusted returns on investments in Orion Oyj A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Orion Oyj may actually be approaching a critical reversion point that can send shares even higher in July 2024.