Correlation Between Metso Oyj and Fortum Oyj
Can any of the company-specific risk be diversified away by investing in both Metso Oyj 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 Metso Oyj and Fortum Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metso Oyj and Fortum Oyj, you can compare the effects of market volatilities on Metso Oyj 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 Metso Oyj with a short position of Fortum Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metso Oyj and Fortum Oyj.
Diversification Opportunities for Metso Oyj and Fortum Oyj
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Metso and Fortum is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Metso Oyj and Fortum Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj and Metso 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 Metso Oyj 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 Metso Oyj i.e., Metso Oyj and Fortum Oyj go up and down completely randomly.
Pair Corralation between Metso Oyj and Fortum Oyj
Assuming the 90 days trading horizon Metso Oyj is expected to generate 1.18 times more return on investment than Fortum Oyj. However, Metso Oyj is 1.18 times more volatile than Fortum Oyj. It trades about 0.01 of its potential returns per unit of risk. Fortum Oyj is currently generating about 0.01 per unit of risk. If you would invest 884.00 in Metso Oyj on September 12, 2024 and sell it today you would earn a total of 23.00 from holding Metso Oyj or generate 2.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Metso Oyj vs. Fortum Oyj
Performance |
| Timeline |
| Metso Oyj |
| Fortum Oyj |
Metso Oyj and Fortum Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metso Oyj and Fortum Oyj
The main advantage of trading using opposite Metso Oyj and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metso Oyj 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 Metso Oyj 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. SSH Communications Security | Fortum Oyj vs. Tamtron Group Oyj | Fortum Oyj vs. Metsa Board Oyj | Fortum Oyj vs. Qt Group Oyj |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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