Correlation Between Orsted A/S and Fortum Oyj
Can any of the company-specific risk be diversified away by investing in both Orsted A/S 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 Orsted A/S and Fortum Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orsted AS and Fortum Oyj, you can compare the effects of market volatilities on Orsted A/S 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 Orsted A/S with a short position of Fortum Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orsted A/S and Fortum Oyj.
Diversification Opportunities for Orsted A/S and Fortum Oyj
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Orsted and Fortum is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Orsted AS and Fortum Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj and Orsted A/S 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 Orsted AS 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 Orsted A/S i.e., Orsted A/S and Fortum Oyj go up and down completely randomly.
Pair Corralation between Orsted A/S and Fortum Oyj
Assuming the 90 days horizon Orsted AS is expected to under-perform the Fortum Oyj. In addition to that, Orsted A/S is 9.03 times more volatile than Fortum Oyj. It trades about -0.33 of its total potential returns per unit of risk. Fortum Oyj is currently generating about -0.04 per unit of volatility. If you would invest 1,430 in Fortum Oyj on October 26, 2024 and sell it today you would lose (5.00) from holding Fortum Oyj or give up 0.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orsted AS vs. Fortum Oyj
Performance |
| Timeline |
| Orsted A/S |
| Fortum Oyj |
Orsted A/S and Fortum Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orsted A/S and Fortum Oyj
The main advantage of trading using opposite Orsted A/S and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orsted A/S 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.| Orsted A/S vs. Innergex Renewable Energy | Orsted A/S vs. Clearway Energy | Orsted A/S vs. Fusion Fuel Green | Orsted A/S vs. Powertap Hydrogen Capital |
| Fortum Oyj vs. Constellation Energy Corp | Fortum Oyj vs. Verbund AG ADR | Fortum Oyj vs. Orsted AS ADR | Fortum Oyj vs. Orsted AS |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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