Correlation Between Neste Oyj and Par Pacific

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Can any of the company-specific risk be diversified away by investing in both Neste Oyj and Par Pacific 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 Par Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Neste Oyj and Par Pacific Holdings, you can compare the effects of market volatilities on Neste Oyj and Par Pacific 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 Par Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neste Oyj and Par Pacific.

Diversification Opportunities for Neste Oyj and Par Pacific

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Neste and Par is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oyj and Par Pacific Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Par Pacific Holdings 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 Par Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Par Pacific Holdings has no effect on the direction of Neste Oyj i.e., Neste Oyj and Par Pacific go up and down completely randomly.

Pair Corralation between Neste Oyj and Par Pacific

Assuming the 90 days horizon Neste Oyj is expected to under-perform the Par Pacific. In addition to that, Neste Oyj is 1.16 times more volatile than Par Pacific Holdings. It trades about -0.18 of its total potential returns per unit of risk. Par Pacific Holdings is currently generating about -0.02 per unit of volatility. If you would invest  1,760  in Par Pacific Holdings on September 28, 2024 and sell it today you would lose (126.00) from holding Par Pacific Holdings or give up 7.16% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Neste Oyj  vs.  Par Pacific Holdings

 Performance 
       Timeline  
Neste Oyj 

Risk-Adjusted Performance

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Over the last 90 days Neste Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating 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.
Par Pacific Holdings 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Par Pacific Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Par Pacific is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Neste Oyj and Par Pacific Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Neste Oyj and Par Pacific

The main advantage of trading using opposite Neste Oyj and Par Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neste Oyj position performs unexpectedly, Par Pacific 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 Par Pacific will offset losses from the drop in Par Pacific's long position.
The idea behind Neste Oyj and Par Pacific Holdings 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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