Correlation Between Reka Industrial and Fortum Oyj

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

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

Diversification Opportunities for Reka Industrial and Fortum Oyj

0.46

Correlation Coefficient

Reka Industrial  Fortum Oyj

Very weak diversification

The 3 months correlation between Reka and Fortum is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Reka Industrial Oyj and Fortum Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj and Reka Industrial 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 Reka Industrial Oyj 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 Reka Industrial i.e., Reka Industrial and Fortum Oyj go up and down completely randomly.

Pair Corralation between Reka Industrial and Fortum Oyj

Assuming the 90 days trading horizon Reka Industrial Oyj is expected to under-perform the Fortum Oyj. In addition to that, Reka Industrial is 1.35 times more volatile than Fortum Oyj. It trades about -0.03 of its total potential returns per unit of risk. Fortum Oyj is currently generating about 0.02 per unit of volatility. If you would invest  1,401  in Fortum Oyj on October 8, 2024 and sell it today you would earn a total of  11.00  from holding Fortum Oyj or generate 0.79% return on investment over 90 days.

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

Reka Industrial Oyj  vs.  Fortum Oyj

Reka Industrial Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reka Industrial Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Reka Industrial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Fortum Oyj

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortum Oyj are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fortum Oyj is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Reka Industrial and Fortum Oyj

The main advantage of trading using opposite Reka Industrial and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reka Industrial 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 Reka Industrial Oyj 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.