Correlation Between American Security and Fortum Oyj
Can any of the company-specific risk be diversified away by investing in both American Security 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 American Security and Fortum Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Security Resources and Fortum Oyj, you can compare the effects of market volatilities on American Security 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 American Security with a short position of Fortum Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Security and Fortum Oyj.
Diversification Opportunities for American Security and Fortum Oyj
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Fortum is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding American Security Resources and Fortum Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj and American Security 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 American Security Resources 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 American Security i.e., American Security and Fortum Oyj go up and down completely randomly.
Pair Corralation between American Security and Fortum Oyj
Given the investment horizon of 90 days American Security Resources is expected to generate 17.12 times more return on investment than Fortum Oyj. However, American Security is 17.12 times more volatile than Fortum Oyj. It trades about 0.07 of its potential returns per unit of risk. Fortum Oyj is currently generating about -0.05 per unit of risk. If you would invest 0.01 in American Security Resources on November 4, 2024 and sell it today you would earn a total of 0.00 from holding American Security Resources or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
American Security Resources vs. Fortum Oyj
Performance |
| Timeline |
| American Security |
| Fortum Oyj |
American Security and Fortum Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Security and Fortum Oyj
The main advantage of trading using opposite American Security and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Security 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.| American Security vs. Astra Energy | American Security vs. Alternus Energy Group | American Security vs. Carnegie Clean Energy | American Security vs. Triad Pro Innovators |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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