Correlation Between Neste Oil and Siili Solutions

Can any of the company-specific risk be diversified away by investing in both Neste Oil and Siili Solutions 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 Siili Solutions 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 Siili Solutions Oyj, you can compare the effects of market volatilities on Neste Oil and Siili Solutions 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 Siili Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neste Oil and Siili Solutions.

Diversification Opportunities for Neste Oil and Siili Solutions

0.91

Correlation Coefficient

Neste Oil  Siili Solutions

Almost no diversification

The 3 months correlation between Neste and Siili is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oil Oyj and Siili Solutions Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siili Solutions 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 Siili Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siili Solutions Oyj has no effect on the direction of Neste Oil i.e., Neste Oil and Siili Solutions go up and down completely randomly.

Pair Corralation between Neste Oil and Siili Solutions

Assuming the 90 days trading horizon Neste Oil Oyj is expected to generate 1.41 times more return on investment than Siili Solutions. However, Neste Oil is 1.41 times more volatile than Siili Solutions Oyj. It trades about -0.1 of its potential returns per unit of risk. Siili Solutions Oyj is currently generating about -0.14 per unit of risk. If you would invest  1,686  in Neste Oil Oyj on September 30, 2024 and sell it today you would lose (507.00) from holding Neste Oil Oyj or give up 30.07% of portfolio value over 90 days.

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

Neste Oil Oyj  vs.  Siili Solutions 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.

Siili Solutions Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siili Solutions 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 Neste Oil and Siili Solutions

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

The idea behind Neste Oil Oyj and Siili Solutions 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.