Correlation Between Neste Oil and EcoUp Oyj

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

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

Diversification Opportunities for Neste Oil and EcoUp Oyj

0.75

Correlation Coefficient

Neste Oil  EcoUp Oyj

Poor diversification

The 3 months correlation between Neste and EcoUp is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oil Oyj and EcoUp Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EcoUp Oyj and Neste Oil 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 Neste Oil Oyj are associated (or correlated) with EcoUp Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EcoUp Oyj has no effect on the direction of Neste Oil i.e., Neste Oil and EcoUp Oyj go up and down completely randomly.

Pair Corralation between Neste Oil and EcoUp Oyj

Assuming the 90 days trading horizon Neste Oil Oyj is expected to under-perform the EcoUp Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Neste Oil Oyj is 1.82 times less risky than EcoUp Oyj. The stock trades about -0.12 of its potential returns per unit of risk. The EcoUp Oyj is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  170.00  in EcoUp Oyj on September 17, 2024 and sell it today you would earn a total of  9.00  from holding EcoUp Oyj or generate 5.29% return on investment over 90 days.

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

Neste Oil Oyj  vs.  EcoUp Oyj

Neste Oil Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neste Oil 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 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.

EcoUp Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EcoUp Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, EcoUp Oyj is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Neste Oil and EcoUp Oyj

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

The idea behind Neste Oil Oyj and EcoUp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.