Correlation Between CEZ A and Fortum Oyj

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

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

Diversification Opportunities for CEZ A and Fortum Oyj

0.1

Correlation Coefficient

CEZ A  Fortum Oyj

Average diversification

The 3 months correlation between CEZ and Fortum is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding CEZ A S and Fortum Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj and CEZ A 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 CEZ A S 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 CEZ A i.e., CEZ A and Fortum Oyj go up and down completely randomly.

Pair Corralation between CEZ A and Fortum Oyj

If you would invest  2,186  in CEZ A S on September 3, 2024 and sell it today you would earn a total of  0.00  from holding CEZ A S or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

CEZ A S  vs.  Fortum Oyj

CEZ A S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CEZ A S has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, CEZ A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fortum Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortum Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CEZ A and Fortum Oyj

The main advantage of trading using opposite CEZ A and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEZ A 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 CEZ A S 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.