Correlation Between Neste Oil and Stora Enso
Can any of the company-specific risk be diversified away by investing in both Neste Oil and Stora Enso 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 Neste Oil and Stora Enso into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Neste Oil Oyj and Stora Enso Oyj, you can compare the effects of market volatilities on Neste Oil and Stora Enso 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 Neste Oil with a short position of Stora Enso. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neste Oil and Stora Enso.
Diversification Opportunities for Neste Oil and Stora Enso
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Neste and Stora is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oil Oyj and Stora Enso Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stora Enso Oyj and Neste Oil 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 Neste Oil Oyj are associated (or correlated) with Stora Enso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stora Enso Oyj has no effect on the direction of Neste Oil i.e., Neste Oil and Stora Enso go up and down completely randomly.
Pair Corralation between Neste Oil and Stora Enso
Assuming the 90 days trading horizon Neste Oil Oyj is expected to generate 1.81 times more return on investment than Stora Enso. However, Neste Oil is 1.81 times more volatile than Stora Enso Oyj. It trades about -0.09 of its potential returns per unit of risk. Stora Enso Oyj is currently generating about -0.38 per unit of risk. If you would invest 1,524 in Neste Oil Oyj on August 24, 2024 and sell it today you would lose (102.00) from holding Neste Oil Oyj or give up 6.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Neste Oil Oyj vs. Stora Enso Oyj
Performance |
| Timeline |
| Neste Oil Oyj |
| Stora Enso Oyj |
Neste Oil and Stora Enso Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Neste Oil and Stora Enso
The main advantage of trading using opposite Neste Oil and Stora Enso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neste Oil position performs unexpectedly, Stora Enso 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 Stora Enso will offset losses from the drop in Stora Enso's long position.| Neste Oil vs. Fortum Oyj | Neste Oil vs. Sampo Oyj A | Neste Oil vs. Nordea Bank Abp | Neste Oil vs. UPM Kymmene Oyj |
| Stora Enso vs. UPM Kymmene Oyj | Stora Enso vs. Valmet Oyj | Stora Enso vs. Wartsila Oyj Abp | Stora Enso vs. Outokumpu 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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