Correlation Between Afarak Group and Fortum Oyj

Can any of the company-specific risk be diversified away by investing in both Afarak Group 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 Afarak Group and Fortum Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Afarak Group Oyj and Fortum Oyj, you can compare the effects of market volatilities on Afarak Group 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 Afarak Group with a short position of Fortum Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Afarak Group and Fortum Oyj.

Diversification Opportunities for Afarak Group and Fortum Oyj

-0.19

Correlation Coefficient

Afarak Group  Fortum Oyj

Good diversification

The 3 months correlation between Afarak and Fortum is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Afarak Group Oyj and Fortum Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj and Afarak 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 Afarak Group 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 Afarak Group i.e., Afarak Group and Fortum Oyj go up and down completely randomly.

Pair Corralation between Afarak Group and Fortum Oyj

If you would invest  1,068  in Fortum Oyj on February 2, 2024 and sell it today you would earn a total of  220.00  from holding Fortum Oyj or generate 20.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Afarak Group Oyj  vs.  Fortum Oyj

Afarak Group Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afarak Group Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Fortum Oyj

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fortum Oyj are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fortum Oyj may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Afarak Group and Fortum Oyj

The main advantage of trading using opposite Afarak Group and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Afarak Group 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 Afarak Group 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.