Correlation Between Fortum Oyj and CHUGOKU EL
Can any of the company-specific risk be diversified away by investing in both Fortum Oyj and CHUGOKU EL 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 CHUGOKU EL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortum Oyj and CHUGOKU EL PWR, you can compare the effects of market volatilities on Fortum Oyj and CHUGOKU EL 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 CHUGOKU EL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortum Oyj and CHUGOKU EL.
Diversification Opportunities for Fortum Oyj and CHUGOKU EL
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fortum and CHUGOKU is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Fortum Oyj and CHUGOKU EL PWR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHUGOKU EL PWR 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 CHUGOKU EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHUGOKU EL PWR has no effect on the direction of Fortum Oyj i.e., Fortum Oyj and CHUGOKU EL go up and down completely randomly.
Pair Corralation between Fortum Oyj and CHUGOKU EL
Assuming the 90 days horizon Fortum Oyj is expected to generate 0.68 times more return on investment than CHUGOKU EL. However, Fortum Oyj is 1.48 times less risky than CHUGOKU EL. It trades about 0.05 of its potential returns per unit of risk. CHUGOKU EL PWR is currently generating about -0.01 per unit of risk. If you would invest 1,203 in Fortum Oyj on September 4, 2024 and sell it today you would earn a total of 192.00 from holding Fortum Oyj or generate 15.96% 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. CHUGOKU EL PWR
Performance |
| Timeline |
| Fortum Oyj |
| CHUGOKU EL PWR |
Fortum Oyj and CHUGOKU EL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortum Oyj and CHUGOKU EL
The main advantage of trading using opposite Fortum Oyj and CHUGOKU EL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortum Oyj position performs unexpectedly, CHUGOKU EL 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 CHUGOKU EL will offset losses from the drop in CHUGOKU EL's long position.| Fortum Oyj vs. Neoen SA | Fortum Oyj vs. Encavis AG | Fortum Oyj vs. TOHOKU EL PWR | Fortum Oyj vs. BEIJJINGNENG CLERGHYC1 |
| CHUGOKU EL vs. Neoen SA | CHUGOKU EL vs. Encavis AG | CHUGOKU EL vs. TOHOKU EL PWR | CHUGOKU EL vs. BEIJJINGNENG CLERGHYC1 |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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