Correlation Between Fortum Oyj and TietoEVRY Corp

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

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

Diversification Opportunities for Fortum Oyj and TietoEVRY Corp

-0.11

Correlation Coefficient

Fortum Oyj  TietoEVRY Corp

Good diversification

The 3 months correlation between Fortum and TietoEVRY is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Fortum Oyj and TietoEVRY Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TietoEVRY Corp 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 TietoEVRY Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TietoEVRY Corp has no effect on the direction of Fortum Oyj i.e., Fortum Oyj and TietoEVRY Corp go up and down completely randomly.

Pair Corralation between Fortum Oyj and TietoEVRY Corp

Assuming the 90 days trading horizon Fortum Oyj is expected to generate 0.83 times more return on investment than TietoEVRY Corp. However, Fortum Oyj is 1.21 times less risky than TietoEVRY Corp. It trades about 0.03 of its potential returns per unit of risk. TietoEVRY Corp is currently generating about -0.05 per unit of risk. If you would invest  1,398  in Fortum Oyj on August 31, 2024 and sell it today you would earn a total of  29.00  from holding Fortum Oyj or generate 2.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Fortum Oyj  vs.  TietoEVRY Corp

Fortum Oyj

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortum Oyj are ranked lower than 2 (%) 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.

TietoEVRY Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TietoEVRY Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, TietoEVRY Corp is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Fortum Oyj and TietoEVRY Corp

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

The idea behind Fortum Oyj and TietoEVRY Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..