Correlation Between Fortum Oyj and Astra Energy

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

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

Diversification Opportunities for Fortum Oyj and Astra Energy

-0.13

Correlation Coefficient

Fortum Oyj  Astra Energy

Good diversification

The 3 months correlation between Fortum and Astra is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Fortum Oyj and Astra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astra Energy and Fortum 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 Fortum Oyj are associated (or correlated) with Astra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astra Energy has no effect on the direction of Fortum Oyj i.e., Fortum Oyj and Astra Energy go up and down completely randomly.

Pair Corralation between Fortum Oyj and Astra Energy

Assuming the 90 days horizon Fortum Oyj is expected to generate 1.32 times less return on investment than Astra Energy. But when comparing it to its historical volatility, Fortum Oyj is 7.65 times less risky than Astra Energy. It trades about 0.2 of its potential returns per unit of risk. Astra Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6.75  in Astra Energy on December 2, 2024 and sell it today you would lose (0.15) from holding Astra Energy or give up 2.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Fortum Oyj  vs.  Astra Energy

Fortum Oyj

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fortum Oyj are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Fortum Oyj may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Astra Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Astra Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile basic indicators, Astra Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fortum Oyj and Astra Energy

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

The idea behind Fortum Oyj and Astra Energy 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.