Correlation Between Neste Oyj and CVR Energy
Can any of the company-specific risk be diversified away by investing in both Neste Oyj and CVR Energy 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 Oyj and CVR Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Neste Oyj and CVR Energy, you can compare the effects of market volatilities on Neste Oyj and CVR Energy 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 Oyj with a short position of CVR Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neste Oyj and CVR Energy.
Diversification Opportunities for Neste Oyj and CVR Energy
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Neste and CVR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oyj and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy and Neste 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 Neste Oyj are associated (or correlated) with CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of Neste Oyj i.e., Neste Oyj and CVR Energy go up and down completely randomly.
Pair Corralation between Neste Oyj and CVR Energy
Assuming the 90 days horizon Neste Oyj is expected to generate 0.6 times more return on investment than CVR Energy. However, Neste Oyj is 1.68 times less risky than CVR Energy. It trades about -0.16 of its potential returns per unit of risk. CVR Energy is currently generating about -0.1 per unit of risk. If you would invest 1,835 in Neste Oyj on September 3, 2024 and sell it today you would lose (351.00) from holding Neste Oyj or give up 19.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Neste Oyj vs. CVR Energy
Performance |
| Timeline |
| Neste Oyj |
| CVR Energy |
Neste Oyj and CVR Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Neste Oyj and CVR Energy
The main advantage of trading using opposite Neste Oyj and CVR Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neste Oyj position performs unexpectedly, CVR Energy 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 CVR Energy will offset losses from the drop in CVR Energy's long position.| Neste Oyj vs. Cosan SA ADR | Neste Oyj vs. Ultrapar Participacoes SA | Neste Oyj vs. Delek Logistics Partners | Neste Oyj vs. Sunoco LP |
| CVR Energy vs. Delek Logistics Partners | CVR Energy vs. PBF Energy | CVR Energy vs. HF Sinclair Corp | CVR Energy vs. Par Pacific Holdings |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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