Correlation Between Fortum Oyj and SSAB AB
Can any of the company-specific risk be diversified away by investing in both Fortum Oyj and SSAB AB 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 SSAB AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortum Oyj and SSAB AB ser, you can compare the effects of market volatilities on Fortum Oyj and SSAB AB 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 SSAB AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortum Oyj and SSAB AB.
Diversification Opportunities for Fortum Oyj and SSAB AB
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Fortum and SSAB is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Fortum Oyj and SSAB AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSAB AB ser 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 are associated (or correlated) with SSAB AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSAB AB ser has no effect on the direction of Fortum Oyj i.e., Fortum Oyj and SSAB AB go up and down completely randomly.
Pair Corralation between Fortum Oyj and SSAB AB
Assuming the 90 days trading horizon Fortum Oyj is expected to generate 0.75 times more return on investment than SSAB AB. However, Fortum Oyj is 1.33 times less risky than SSAB AB. It trades about 0.14 of its potential returns per unit of risk. SSAB AB ser is currently generating about 0.02 per unit of risk. If you would invest 1,366 in Fortum Oyj on September 4, 2024 and sell it today you would earn a total of 77.00 from holding Fortum Oyj or generate 5.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortum Oyj vs. SSAB AB ser
Performance |
| Timeline |
| Fortum Oyj |
| SSAB AB ser |
Fortum Oyj and SSAB AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortum Oyj and SSAB AB
The main advantage of trading using opposite Fortum Oyj and SSAB AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortum Oyj position performs unexpectedly, SSAB AB 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 SSAB AB will offset losses from the drop in SSAB AB's long position.The idea behind Fortum Oyj and SSAB AB ser 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.| SSAB AB vs. SSAB AB ser | SSAB AB vs. Outokumpu Oyj | SSAB AB vs. Metsa Board Oyj | SSAB AB vs. Telia Company AB |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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