Correlation Between Fortum Oyj and CEZ A

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

By analyzing existing cross correlation between Fortum Oyj and CEZ A S, you can compare the effects of market volatilities on Fortum Oyj and CEZ A 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 CEZ A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortum Oyj and CEZ A.

Diversification Opportunities for Fortum Oyj and CEZ A

0.0

Correlation Coefficient

Fortum Oyj  CEZ A

Pay attention - limited upside

The 3 months correlation between Fortum and CEZ is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Fortum Oyj and CEZ A S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEZ A S 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 CEZ A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEZ A S has no effect on the direction of Fortum Oyj i.e., Fortum Oyj and CEZ A go up and down completely randomly.

Pair Corralation between Fortum Oyj and CEZ A

If you would invest  1,430  in Fortum Oyj on December 28, 2024 and sell it today you would earn a total of  179.00  from holding Fortum Oyj or generate 12.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Fortum Oyj  vs.  CEZ A S

Fortum Oyj

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortum Oyj are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Fortum Oyj reported solid returns over the last few months and may actually be approaching a breakup point.

CEZ A S

Risk-Adjusted Performance

Very Weak

Over the last 90 days CEZ A S has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, CEZ A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fortum Oyj and CEZ A

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

The idea behind Fortum Oyj and CEZ A S 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.