Correlation Between Oatly Group and Fortescue

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

By analyzing existing cross correlation between Oatly Group AB and Fortescue Metals Group, you can compare the effects of market volatilities on Oatly Group and Fortescue 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 Oatly Group with a short position of Fortescue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oatly Group and Fortescue.

Diversification Opportunities for Oatly Group and Fortescue

-0.27

Correlation Coefficient

Oatly Group  Fortescue

Very good diversification

The 3 months correlation between Oatly and Fortescue is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Oatly Group AB and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals and Oatly Group 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 Oatly Group AB are associated (or correlated) with Fortescue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of Oatly Group i.e., Oatly Group and Fortescue go up and down completely randomly.

Pair Corralation between Oatly Group and Fortescue

Given the investment horizon of 90 days Oatly Group AB is expected to under-perform the Fortescue. In addition to that, Oatly Group is 42.37 times more volatile than Fortescue Metals Group. It trades about -0.02 of its total potential returns per unit of risk. Fortescue Metals Group is currently generating about 0.04 per unit of volatility. If you would invest  9,700  in Fortescue Metals Group on December 2, 2024 and sell it today you would earn a total of  37.00  from holding Fortescue Metals Group or generate 0.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Oatly Group AB  vs.  Fortescue Metals Group

Oatly Group AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oatly Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Fortescue Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortescue Metals Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fortescue is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Oatly Group and Fortescue

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

The idea behind Oatly Group AB and Fortescue Metals Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.