Correlation Between Fortum Oyj and Nurminen Logistics

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

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

Diversification Opportunities for Fortum Oyj and Nurminen Logistics

-0.36

Correlation Coefficient

Fortum Oyj  Nurminen Logistics

Very good diversification

The 3 months correlation between Fortum and Nurminen is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fortum Oyj and Nurminen Logistics Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nurminen Logistics 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 are associated (or correlated) with Nurminen Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nurminen Logistics Oyj has no effect on the direction of Fortum Oyj i.e., Fortum Oyj and Nurminen Logistics go up and down completely randomly.

Pair Corralation between Fortum Oyj and Nurminen Logistics

Assuming the 90 days trading horizon Fortum Oyj is expected to under-perform the Nurminen Logistics. But the stock apears to be less risky and, when comparing its historical volatility, Fortum Oyj is 1.08 times less risky than Nurminen Logistics. The stock trades about -0.01 of its potential returns per unit of risk. The Nurminen Logistics Oyj is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  96.00  in Nurminen Logistics Oyj on October 9, 2024 and sell it today you would earn a total of  12.00  from holding Nurminen Logistics Oyj or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Fortum Oyj  vs.  Nurminen Logistics Oyj

Fortum Oyj

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortum Oyj are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fortum Oyj is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Nurminen Logistics Oyj

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nurminen Logistics Oyj are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Nurminen Logistics demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortum Oyj and Nurminen Logistics

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

The idea behind Fortum Oyj and Nurminen Logistics 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.