Correlation Between Fortum Oyj and Fortum Oyj

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

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

Diversification Opportunities for Fortum Oyj and Fortum Oyj

0.54

Correlation Coefficient

Fortum Oyj  Fortum Oyj

Very weak diversification

The 3 months correlation between Fortum and Fortum is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Fortum Oyj ADR and Fortum Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj 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 ADR 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 Fortum Oyj i.e., Fortum Oyj and Fortum Oyj go up and down completely randomly.

Pair Corralation between Fortum Oyj and Fortum Oyj

Assuming the 90 days horizon Fortum Oyj ADR is expected to generate 1.48 times more return on investment than Fortum Oyj. However, Fortum Oyj is 1.48 times more volatile than Fortum Oyj. It trades about 0.04 of its potential returns per unit of risk. Fortum Oyj is currently generating about -0.02 per unit of risk. If you would invest  288.00  in Fortum Oyj ADR on September 5, 2024 and sell it today you would earn a total of  20.00  from holding Fortum Oyj ADR or generate 6.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.2%
Values	Daily Returns

Fortum Oyj ADR  vs.  Fortum Oyj

Fortum Oyj ADR

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortum Oyj ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Fortum Oyj is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Fortum Oyj and Fortum Oyj

The main advantage of trading using opposite Fortum Oyj and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortum Oyj 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 Fortum Oyj ADR 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.