Correlation Between TOHOKU EL and Fortum Oyj
Can any of the company-specific risk be diversified away by investing in both TOHOKU EL 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 TOHOKU EL and Fortum Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TOHOKU EL PWR and Fortum Oyj, you can compare the effects of market volatilities on TOHOKU EL 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 TOHOKU EL with a short position of Fortum Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOHOKU EL and Fortum Oyj.
Diversification Opportunities for TOHOKU EL and Fortum Oyj
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between TOHOKU and Fortum is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding TOHOKU EL PWR and Fortum Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj and TOHOKU EL 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 TOHOKU EL PWR 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 TOHOKU EL i.e., TOHOKU EL and Fortum Oyj go up and down completely randomly.
Pair Corralation between TOHOKU EL and Fortum Oyj
Assuming the 90 days horizon TOHOKU EL PWR is expected to under-perform the Fortum Oyj. In addition to that, TOHOKU EL is 1.78 times more volatile than Fortum Oyj. It trades about -0.08 of its total potential returns per unit of risk. Fortum Oyj is currently generating about 0.1 per unit of volatility. If you would invest 1,372 in Fortum Oyj on September 12, 2024 and sell it today you would earn a total of 47.00 from holding Fortum Oyj or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TOHOKU EL PWR vs. Fortum Oyj
Performance |
| Timeline |
| TOHOKU EL PWR |
| Fortum Oyj |
TOHOKU EL and Fortum Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TOHOKU EL and Fortum Oyj
The main advantage of trading using opposite TOHOKU EL and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOHOKU EL 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.| TOHOKU EL vs. GigaMedia | TOHOKU EL vs. Cass Information Systems | TOHOKU EL vs. MICRONIC MYDATA | TOHOKU EL vs. Penn National Gaming |
| Fortum Oyj vs. VERBUND AG ADR | Fortum Oyj vs. TOHOKU EL PWR | Fortum Oyj vs. BEIJJINGNENG CLERGHYC1 | Fortum Oyj vs. EnviTec Biogas AG |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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