Correlation Between Powertap Hydrogen and Fortum Oyj

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

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

Diversification Opportunities for Powertap Hydrogen and Fortum Oyj

-0.21

Correlation Coefficient

Powertap Hydrogen  Fortum Oyj

Very good diversification

The 3 months correlation between Powertap and Fortum is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Powertap Hydrogen Capital and Fortum Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj ADR and Powertap Hydrogen 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 Powertap Hydrogen Capital 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 ADR has no effect on the direction of Powertap Hydrogen i.e., Powertap Hydrogen and Fortum Oyj go up and down completely randomly.

Pair Corralation between Powertap Hydrogen and Fortum Oyj

Assuming the 90 days horizon Powertap Hydrogen Capital is expected to under-perform the Fortum Oyj. In addition to that, Powertap Hydrogen is 4.87 times more volatile than Fortum Oyj ADR. It trades about -0.13 of its total potential returns per unit of risk. Fortum Oyj ADR is currently generating about 0.11 per unit of volatility. If you would invest  279.00  in Fortum Oyj ADR on December 30, 2024 and sell it today you would earn a total of  49.00  from holding Fortum Oyj ADR or generate 17.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Powertap Hydrogen Capital  vs.  Fortum Oyj ADR

Powertap Hydrogen Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Powertap Hydrogen Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Fortum Oyj ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortum Oyj ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Fortum Oyj showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Powertap Hydrogen and Fortum Oyj

The main advantage of trading using opposite Powertap Hydrogen and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Powertap Hydrogen 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 Powertap Hydrogen Capital and Fortum Oyj ADR 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.