Correlation Between VERBUND AG and Fortum Oyj

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

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

Diversification Opportunities for VERBUND AG and Fortum Oyj

-0.2

Correlation Coefficient

VERBUND AG  Fortum Oyj

Good diversification

The 3 months correlation between VERBUND and Fortum is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding VERBUND AG ADR and Fortum Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj and VERBUND AG 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 VERBUND AG ADR 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 has no effect on the direction of VERBUND AG i.e., VERBUND AG and Fortum Oyj go up and down completely randomly.

Pair Corralation between VERBUND AG and Fortum Oyj

Assuming the 90 days horizon VERBUND AG ADR is expected to under-perform the Fortum Oyj. In addition to that, VERBUND AG is 1.09 times more volatile than Fortum Oyj. It trades about -0.07 of its total potential returns per unit of risk. Fortum Oyj is currently generating about 0.11 per unit of volatility. If you would invest  1,363  in Fortum Oyj on December 29, 2024 and sell it today you would earn a total of  156.00  from holding Fortum Oyj or generate 11.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

VERBUND AG ADR  vs.  Fortum Oyj

VERBUND AG ADR

Risk-Adjusted Performance

Very Weak

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

Fortum Oyj

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortum Oyj are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fortum Oyj may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with VERBUND AG and Fortum Oyj

The main advantage of trading using opposite VERBUND AG and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VERBUND AG 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 VERBUND AG ADR and Fortum 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.