Correlation Between EnviTec Biogas and Fortum Oyj
Can any of the company-specific risk be diversified away by investing in both EnviTec Biogas 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 EnviTec Biogas and Fortum Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EnviTec Biogas AG and Fortum Oyj, you can compare the effects of market volatilities on EnviTec Biogas 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 EnviTec Biogas with a short position of Fortum Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of EnviTec Biogas and Fortum Oyj.
Diversification Opportunities for EnviTec Biogas and Fortum Oyj
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between EnviTec and Fortum is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding EnviTec Biogas AG and Fortum Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj and EnviTec Biogas 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 EnviTec Biogas AG 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 EnviTec Biogas i.e., EnviTec Biogas and Fortum Oyj go up and down completely randomly.
Pair Corralation between EnviTec Biogas and Fortum Oyj
Assuming the 90 days horizon EnviTec Biogas is expected to generate 2.27 times less return on investment than Fortum Oyj. In addition to that, EnviTec Biogas is 1.47 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 0.1 per unit of volatility. If you would invest 1,372 in Fortum Oyj on September 12, 2024 and sell it today you would earn a total of 47.00 from holding Fortum Oyj or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EnviTec Biogas AG vs. Fortum Oyj
Performance |
| Timeline |
| EnviTec Biogas AG |
| Fortum Oyj |
EnviTec Biogas and Fortum Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EnviTec Biogas and Fortum Oyj
The main advantage of trading using opposite EnviTec Biogas and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EnviTec Biogas 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 EnviTec Biogas AG 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.
| Fortum Oyj vs. VERBUND AG ADR | Fortum Oyj vs. TOHOKU EL PWR | Fortum Oyj vs. BEIJJINGNENG CLERGHYC1 | Fortum Oyj vs. EnviTec Biogas AG |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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