Correlation Between Neste Oil and Aspo Oyj

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

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

Diversification Opportunities for Neste Oil and Aspo Oyj

0.85

Correlation Coefficient

Neste Oil  Aspo Oyj

Very poor diversification

The 3 months correlation between Neste and Aspo is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oil Oyj and Aspo Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspo Oyj and Neste Oil 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 Neste Oil Oyj are associated (or correlated) with Aspo Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspo Oyj has no effect on the direction of Neste Oil i.e., Neste Oil and Aspo Oyj go up and down completely randomly.

Pair Corralation between Neste Oil and Aspo Oyj

Assuming the 90 days trading horizon Neste Oil Oyj is expected to generate 2.23 times more return on investment than Aspo Oyj. However, Neste Oil is 2.23 times more volatile than Aspo Oyj. It trades about -0.06 of its potential returns per unit of risk. Aspo Oyj is currently generating about -0.28 per unit of risk. If you would invest  1,439  in Neste Oil Oyj on October 24, 2024 and sell it today you would lose (152.00) from holding Neste Oil Oyj or give up 10.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Neste Oil Oyj  vs.  Aspo Oyj

Neste Oil Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neste Oil Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Aspo Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aspo Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Neste Oil and Aspo Oyj

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

The idea behind Neste Oil Oyj and Aspo 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.