Correlation Between Orion Oyj and Fortum Oyj

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

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

Diversification Opportunities for Orion Oyj and Fortum Oyj

0.38

Correlation Coefficient

Orion Oyj  Fortum Oyj

Weak diversification

The 3 months correlation between Orion and Fortum is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Orion Oyj B and Fortum Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj and Orion 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 Orion Oyj B are associated (or correlated) with Fortum Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortum Oyj has no effect on the direction of Orion Oyj i.e., Orion Oyj and Fortum Oyj go up and down completely randomly.

Pair Corralation between Orion Oyj and Fortum Oyj

Assuming the 90 days trading horizon Orion Oyj B is expected to under-perform the Fortum Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Orion Oyj B is 1.06 times less risky than Fortum Oyj. The stock trades about -0.1 of its potential returns per unit of risk. The Fortum Oyj is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,349  in Fortum Oyj on September 16, 2024 and sell it today you would lose (1.00) from holding Fortum Oyj or give up 0.07% of portfolio value over 90 days.

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

Orion Oyj B  vs.  Fortum Oyj

Orion Oyj B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orion Oyj B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Fortum Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortum Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fortum Oyj is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Orion Oyj and Fortum Oyj

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

The idea behind Orion Oyj B and Fortum 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 Transaction History module to view history of all your transactions and understand their impact on performance.