Correlation Between Fortum Oyj and Metsa Board

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

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

Diversification Opportunities for Fortum Oyj and Metsa Board

0.42

Correlation Coefficient

Fortum Oyj  Metsa Board

Very weak diversification

The 3 months correlation between Fortum and Metsa is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Fortum Oyj and Metsa Board Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metsa Board Oyj 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 are associated (or correlated) with Metsa Board. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metsa Board Oyj has no effect on the direction of Fortum Oyj i.e., Fortum Oyj and Metsa Board go up and down completely randomly.

Pair Corralation between Fortum Oyj and Metsa Board

Assuming the 90 days trading horizon Fortum Oyj is expected to generate 0.83 times more return on investment than Metsa Board. However, Fortum Oyj is 1.2 times less risky than Metsa Board. It trades about 0.03 of its potential returns per unit of risk. Metsa Board Oyj is currently generating about -0.06 per unit of risk. If you would invest  1,194  in Fortum Oyj on September 29, 2024 and sell it today you would earn a total of  163.00  from holding Fortum Oyj or generate 13.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Fortum Oyj  vs.  Metsa Board Oyj

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 somewhat strong basic indicators, Fortum Oyj is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Metsa Board Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metsa Board Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Fortum Oyj and Metsa Board

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

The idea behind Fortum Oyj and Metsa Board 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.