Correlation Between Neste Oyj and Delek Energy

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

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

Diversification Opportunities for Neste Oyj and Delek Energy

0.2

Correlation Coefficient

Neste Oyj  Delek Energy

Modest diversification

The 3 months correlation between Neste and Delek is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oyj and Delek Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Energy and Neste 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 Neste Oyj are associated (or correlated) with Delek Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Energy has no effect on the direction of Neste Oyj i.e., Neste Oyj and Delek Energy go up and down completely randomly.

Pair Corralation between Neste Oyj and Delek Energy

Assuming the 90 days horizon Neste Oyj is expected to under-perform the Delek Energy. In addition to that, Neste Oyj is 1.25 times more volatile than Delek Energy. It trades about -0.12 of its total potential returns per unit of risk. Delek Energy is currently generating about -0.04 per unit of volatility. If you would invest  1,942  in Delek Energy on September 20, 2024 and sell it today you would lose (191.00) from holding Delek Energy or give up 9.84% of portfolio value over 90 days.

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

Neste Oyj  vs.  Delek Energy

Neste Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neste 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 forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Delek Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delek Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Neste Oyj and Delek Energy

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

The idea behind Neste Oyj and Delek Energy 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.