Correlation Between Fortum Oyj and Triad Pro
Can any of the company-specific risk be diversified away by investing in both Fortum Oyj and Triad Pro 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 Fortum Oyj and Triad Pro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortum Oyj ADR and Triad Pro Innovators, you can compare the effects of market volatilities on Fortum Oyj and Triad Pro 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 Fortum Oyj with a short position of Triad Pro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortum Oyj and Triad Pro.
Diversification Opportunities for Fortum Oyj and Triad Pro
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fortum and Triad is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fortum Oyj ADR and Triad Pro Innovators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triad Pro Innovators and Fortum Oyj 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 Fortum Oyj ADR are associated (or correlated) with Triad Pro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triad Pro Innovators has no effect on the direction of Fortum Oyj i.e., Fortum Oyj and Triad Pro go up and down completely randomly.
Pair Corralation between Fortum Oyj and Triad Pro
Assuming the 90 days horizon Fortum Oyj is expected to generate 5.23 times less return on investment than Triad Pro. But when comparing it to its historical volatility, Fortum Oyj ADR is 10.95 times less risky than Triad Pro. It trades about 0.08 of its potential returns per unit of risk. Triad Pro Innovators is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 0.11 in Triad Pro Innovators on August 27, 2024 and sell it today you would lose (0.10) from holding Triad Pro Innovators or give up 90.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortum Oyj ADR vs. Triad Pro Innovators
Performance |
| Timeline |
| Fortum Oyj ADR |
| Triad Pro Innovators |
Fortum Oyj and Triad Pro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortum Oyj and Triad Pro
The main advantage of trading using opposite Fortum Oyj and Triad Pro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortum Oyj position performs unexpectedly, Triad Pro 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 Triad Pro will offset losses from the drop in Triad Pro's long position.The idea behind Fortum Oyj ADR and Triad Pro Innovators 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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