Correlation Between Neste Oyj and Star Gas

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

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

Diversification Opportunities for Neste Oyj and Star Gas

-0.56

Correlation Coefficient

Neste Oyj  Star Gas

Excellent diversification

The 3 months correlation between Neste and Star is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oyj and Star Gas Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Gas Partners and Neste 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 Neste Oyj are associated (or correlated) with Star Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Gas Partners has no effect on the direction of Neste Oyj i.e., Neste Oyj and Star Gas go up and down completely randomly.

Pair Corralation between Neste Oyj and Star Gas

Assuming the 90 days horizon Neste Oyj is expected to under-perform the Star Gas. In addition to that, Neste Oyj is 3.03 times more volatile than Star Gas Partners. It trades about -0.03 of its total potential returns per unit of risk. Star Gas Partners is currently generating about 0.15 per unit of volatility. If you would invest  1,143  in Star Gas Partners on December 28, 2024 and sell it today you would earn a total of  160.00  from holding Star Gas Partners or generate 14.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Neste Oyj  vs.  Star Gas Partners

Neste Oyj

Risk-Adjusted Performance

Very Weak

Over the last 90 days Neste Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Star Gas Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Star Gas Partners are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Star Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Neste Oyj and Star Gas

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

The idea behind Neste Oyj and Star Gas Partners 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.