Correlation Between Neste Oil and Telia Company
Can any of the company-specific risk be diversified away by investing in both Neste Oil and Telia Company 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 Telia Company 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 Telia Company AB, you can compare the effects of market volatilities on Neste Oil and Telia Company 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 Telia Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neste Oil and Telia Company.
Diversification Opportunities for Neste Oil and Telia Company
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Neste and Telia is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oil Oyj and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company 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 Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of Neste Oil i.e., Neste Oil and Telia Company go up and down completely randomly.
Pair Corralation between Neste Oil and Telia Company
Assuming the 90 days trading horizon Neste Oil Oyj is expected to under-perform the Telia Company. In addition to that, Neste Oil is 2.06 times more volatile than Telia Company AB. It trades about -0.14 of its total potential returns per unit of risk. Telia Company AB is currently generating about -0.11 per unit of volatility. If you would invest 288.00 in Telia Company AB on September 15, 2024 and sell it today you would lose (23.00) from holding Telia Company AB or give up 7.99% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Neste Oil Oyj vs. Telia Company AB
Performance |
Timeline |
Neste Oil Oyj |
Telia Company |
Neste Oil and Telia Company Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Neste Oil and Telia Company
The main advantage of trading using opposite Neste Oil and Telia Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neste Oil position performs unexpectedly, Telia Company 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 Telia Company will offset losses from the drop in Telia Company's long position.Neste Oil vs. Fortum Oyj | ||
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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