Correlation Between Fortum Oyj and Altius Renewable

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

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

Diversification Opportunities for Fortum Oyj and Altius Renewable

-0.08

Correlation Coefficient

Fortum Oyj  Altius Renewable

Good diversification

The 3 months correlation between Fortum and Altius is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Fortum Oyj ADR and Altius Renewable Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altius Renewable Roy and Fortum 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 Fortum Oyj ADR are associated (or correlated) with Altius Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altius Renewable Roy has no effect on the direction of Fortum Oyj i.e., Fortum Oyj and Altius Renewable go up and down completely randomly.

Pair Corralation between Fortum Oyj and Altius Renewable

Assuming the 90 days horizon Fortum Oyj ADR is expected to under-perform the Altius Renewable. In addition to that, Fortum Oyj is 1.78 times more volatile than Altius Renewable Royalties. It trades about -0.02 of its total potential returns per unit of risk. Altius Renewable Royalties is currently generating about 0.19 per unit of volatility. If you would invest  718.00  in Altius Renewable Royalties on September 1, 2024 and sell it today you would earn a total of  127.00  from holding Altius Renewable Royalties or generate 17.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Fortum Oyj ADR  vs.  Altius Renewable Royalties

Fortum Oyj ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Altius Renewable Roy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Altius Renewable Royalties are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Altius Renewable reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortum Oyj and Altius Renewable

The main advantage of trading using opposite Fortum Oyj and Altius Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortum Oyj position performs unexpectedly, Altius Renewable 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 Altius Renewable will offset losses from the drop in Altius Renewable's long position.

The idea behind Fortum Oyj ADR and Altius Renewable Royalties 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.