Correlation Between Astra Energy and Fortum Oyj

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

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

Diversification Opportunities for Astra Energy and Fortum Oyj

-0.47

Correlation Coefficient

Astra Energy  Fortum Oyj

Very good diversification

The 3 months correlation between Astra and Fortum is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Astra Energy and Fortum Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj ADR and Astra Energy 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 Astra Energy 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 ADR has no effect on the direction of Astra Energy i.e., Astra Energy and Fortum Oyj go up and down completely randomly.

Pair Corralation between Astra Energy and Fortum Oyj

Given the investment horizon of 90 days Astra Energy is expected to generate 3.18 times more return on investment than Fortum Oyj. However, Astra Energy is 3.18 times more volatile than Fortum Oyj ADR. It trades about 0.05 of its potential returns per unit of risk. Fortum Oyj ADR is currently generating about 0.13 per unit of risk. If you would invest  7.78  in Astra Energy on December 28, 2024 and sell it today you would earn a total of  0.59  from holding Astra Energy or generate 7.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Astra Energy  vs.  Fortum Oyj ADR

Astra Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Astra Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Astra Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fortum Oyj ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortum Oyj ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Fortum Oyj showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astra Energy and Fortum Oyj

The main advantage of trading using opposite Astra Energy and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astra Energy 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 Astra Energy and Fortum Oyj ADR 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.