Correlation Between Sunoco LP and Neste Oyj

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

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

Diversification Opportunities for Sunoco LP and Neste Oyj

-0.36

Correlation Coefficient

Sunoco LP  Neste Oyj

Very good diversification

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

Pair Corralation between Sunoco LP and Neste Oyj

Considering the 90-day investment horizon Sunoco LP is expected to generate 0.26 times more return on investment than Neste Oyj. However, Sunoco LP is 3.87 times less risky than Neste Oyj. It trades about 0.23 of its potential returns per unit of risk. Neste Oyj is currently generating about -0.03 per unit of risk. If you would invest  5,015  in Sunoco LP on December 28, 2024 and sell it today you would earn a total of  905.00  from holding Sunoco LP or generate 18.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.44%
Values	Daily Returns

Sunoco LP  vs.  Neste Oyj

Sunoco LP

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sunoco LP are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Sunoco LP displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Sunoco LP and Neste Oyj

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

The idea behind Sunoco LP and Neste 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.