Correlation Between Alma Media and Fortum Oyj

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

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

Diversification Opportunities for Alma Media and Fortum Oyj

0.65

Correlation Coefficient

Alma Media  Fortum Oyj

Poor diversification

The 3 months correlation between Alma and Fortum is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Alma Media Oyj and Fortum Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj and Alma Media 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 Alma Media Oyj are associated (or correlated) with Fortum Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortum Oyj has no effect on the direction of Alma Media i.e., Alma Media and Fortum Oyj go up and down completely randomly.

Pair Corralation between Alma Media and Fortum Oyj

Assuming the 90 days trading horizon Alma Media Oyj is expected to generate 1.14 times more return on investment than Fortum Oyj. However, Alma Media is 1.14 times more volatile than Fortum Oyj. It trades about 0.12 of its potential returns per unit of risk. Fortum Oyj is currently generating about 0.13 per unit of risk. If you would invest  1,100  in Alma Media Oyj on December 30, 2024 and sell it today you would earn a total of  145.00  from holding Alma Media Oyj or generate 13.18% return on investment over 90 days.

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

Alma Media Oyj  vs.  Fortum Oyj

Alma Media Oyj

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alma Media Oyj are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Alma Media exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fortum Oyj

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortum Oyj are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Fortum Oyj may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alma Media and Fortum Oyj

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

The idea behind Alma Media Oyj and Fortum 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.