Correlation Between Neste Oil and Duell Oyj

Can any of the company-specific risk be diversified away by investing in both Neste Oil and Duell 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 Duell 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 Duell Oyj, you can compare the effects of market volatilities on Neste Oil and Duell 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 Duell Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neste Oil and Duell Oyj.

Diversification Opportunities for Neste Oil and Duell Oyj

0.36

Correlation Coefficient

Neste Oil  Duell Oyj

Weak diversification

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

Pair Corralation between Neste Oil and Duell Oyj

Assuming the 90 days trading horizon Neste Oil Oyj is expected to under-perform the Duell Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Neste Oil Oyj is 1.98 times less risky than Duell Oyj. The stock trades about -0.1 of its potential returns per unit of risk. The Duell Oyj is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,662  in Duell Oyj on September 26, 2024 and sell it today you would lose (2,957) from holding Duell Oyj or give up 80.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Neste Oil Oyj  vs.  Duell 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 weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Duell Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Neste Oil and Duell Oyj

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

The idea behind Neste Oil Oyj and Duell 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.