Correlation Between Oatly Group and NuStar

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Can any of the company-specific risk be diversified away by investing in both Oatly Group and NuStar 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 Oatly Group and NuStar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oatly Group AB and NuStar Logistics 6, you can compare the effects of market volatilities on Oatly Group and NuStar 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 Oatly Group with a short position of NuStar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oatly Group and NuStar.

Diversification Opportunities for Oatly Group and NuStar

0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between Oatly and NuStar is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Oatly Group AB and NuStar Logistics 6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuStar Logistics 6 and Oatly Group 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 Oatly Group AB are associated (or correlated) with NuStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuStar Logistics 6 has no effect on the direction of Oatly Group i.e., Oatly Group and NuStar go up and down completely randomly.

Pair Corralation between Oatly Group and NuStar

Given the investment horizon of 90 days Oatly Group AB is expected to under-perform the NuStar. In addition to that, Oatly Group is 7.56 times more volatile than NuStar Logistics 6. It trades about -0.02 of its total potential returns per unit of risk. NuStar Logistics 6 is currently generating about -0.01 per unit of volatility. If you would invest  9,973  in NuStar Logistics 6 on September 2, 2024 and sell it today you would lose (232.00) from holding NuStar Logistics 6 or give up 2.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy97.58%
ValuesDaily Returns

Oatly Group AB  vs.  NuStar Logistics 6

 Performance 
       Timeline  
Oatly Group AB 

Risk-Adjusted Performance

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Over the last 90 days Oatly Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
NuStar Logistics 6 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days NuStar Logistics 6 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NuStar is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Oatly Group and NuStar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Oatly Group and NuStar

The main advantage of trading using opposite Oatly Group and NuStar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oatly Group position performs unexpectedly, NuStar 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 NuStar will offset losses from the drop in NuStar's long position.
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The idea behind Oatly Group AB and NuStar Logistics 6 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.
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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