Correlation Between SSAB AB and Metso Oyj

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

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

Diversification Opportunities for SSAB AB and Metso Oyj

-0.44

Correlation Coefficient

SSAB AB  Metso Oyj

Very good diversification

The 3 months correlation between SSAB and Metso is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding SSAB AB ser and Metso Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metso Oyj and SSAB AB 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 SSAB AB ser are associated (or correlated) with Metso Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metso Oyj has no effect on the direction of SSAB AB i.e., SSAB AB and Metso Oyj go up and down completely randomly.

Pair Corralation between SSAB AB and Metso Oyj

Assuming the 90 days trading horizon SSAB AB ser is expected to generate 106.6 times more return on investment than Metso Oyj. However, SSAB AB is 106.6 times more volatile than Metso Oyj. It trades about 0.19 of its potential returns per unit of risk. Metso Oyj is currently generating about -0.05 per unit of risk. If you would invest  623.00  in SSAB AB ser on February 3, 2024 and sell it today you would lose (84.00) from holding SSAB AB ser or give up 13.48% of portfolio value over 90 days.

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

SSAB AB ser  vs.  Metso Oyj

SSAB AB ser

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SSAB AB ser are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, SSAB AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Metso Oyj

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metso Oyj are ranked lower than 12 (%) 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.

Pair Trading with SSAB AB and Metso Oyj

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

The idea behind SSAB AB ser and Metso 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.