Correlation Between Fortum Oyj and UGE International

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

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

Diversification Opportunities for Fortum Oyj and UGE International

-0.44

Correlation Coefficient

Fortum Oyj  UGE International

Very good diversification

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

Pair Corralation between Fortum Oyj and UGE International

Assuming the 90 days horizon Fortum Oyj is expected to under-perform the UGE International. In addition to that, Fortum Oyj is 1.06 times more volatile than UGE International. It trades about -0.02 of its total potential returns per unit of risk. UGE International is currently generating about 0.09 per unit of volatility. If you would invest  137.00  in UGE International on September 5, 2024 and sell it today you would earn a total of  9.00  from holding UGE International or generate 6.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	41.13%
Values	Daily Returns

Fortum Oyj  vs.  UGE International

Fortum Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortum Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

UGE International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UGE International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, UGE International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fortum Oyj and UGE International

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

The idea behind Fortum Oyj and UGE International 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..