Correlation Between Fortum Oyj and Wartsila Oyj
Can any of the company-specific risk be diversified away by investing in both Fortum Oyj and Wartsila 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 Fortum Oyj and Wartsila Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortum Oyj and Wartsila Oyj Abp, you can compare the effects of market volatilities on Fortum Oyj and Wartsila 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 Fortum Oyj with a short position of Wartsila Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortum Oyj and Wartsila Oyj.
Diversification Opportunities for Fortum Oyj and Wartsila Oyj
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fortum and Wartsila is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Fortum Oyj and Wartsila Oyj Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wartsila Oyj Abp 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 Wartsila Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wartsila Oyj Abp has no effect on the direction of Fortum Oyj i.e., Fortum Oyj and Wartsila Oyj go up and down completely randomly.
Pair Corralation between Fortum Oyj and Wartsila Oyj
Assuming the 90 days trading horizon Fortum Oyj is expected to under-perform the Wartsila Oyj. In addition to that, Fortum Oyj is 1.2 times more volatile than Wartsila Oyj Abp. It trades about -0.03 of its total potential returns per unit of risk. Wartsila Oyj Abp is currently generating about 0.07 per unit of volatility. If you would invest 1,769 in Wartsila Oyj Abp on November 3, 2024 and sell it today you would earn a total of 57.00 from holding Wartsila Oyj Abp or generate 3.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortum Oyj vs. Wartsila Oyj Abp
Performance |
| Timeline |
| Fortum Oyj |
| Wartsila Oyj Abp |
Fortum Oyj and Wartsila Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortum Oyj and Wartsila Oyj
The main advantage of trading using opposite Fortum Oyj and Wartsila Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortum Oyj position performs unexpectedly, Wartsila 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 Wartsila Oyj will offset losses from the drop in Wartsila Oyj's long position.| Fortum Oyj vs. HKFoods Oyj A | Fortum Oyj vs. Nightingale Health Oyj | Fortum Oyj vs. Alandsbanken Abp B | Fortum Oyj vs. Finnair Oyj |
| Wartsila Oyj vs. Sampo Oyj A | Wartsila Oyj vs. Fortum Oyj | Wartsila Oyj vs. UPM Kymmene Oyj | Wartsila Oyj vs. Nordea Bank Abp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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