Correlation Between PBF Energy and Neste Oyj

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

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

Diversification Opportunities for PBF Energy and Neste Oyj

0.42

Correlation Coefficient

PBF Energy  Neste Oyj

Very weak diversification

The 3 months correlation between PBF and Neste is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding PBF Energy and Neste Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neste Oyj and PBF Energy 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 PBF Energy are associated (or correlated) with Neste Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neste Oyj has no effect on the direction of PBF Energy i.e., PBF Energy and Neste Oyj go up and down completely randomly.

Pair Corralation between PBF Energy and Neste Oyj

Considering the 90-day investment horizon PBF Energy is expected to generate 0.71 times more return on investment than Neste Oyj. However, PBF Energy is 1.41 times less risky than Neste Oyj. It trades about -0.06 of its potential returns per unit of risk. Neste Oyj is currently generating about -0.11 per unit of risk. If you would invest  3,277  in PBF Energy on September 17, 2024 and sell it today you would lose (351.00) from holding PBF Energy or give up 10.71% of portfolio value over 90 days.

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

PBF Energy  vs.  Neste Oyj

PBF Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PBF Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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.

Pair Trading with PBF Energy and Neste Oyj

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

The idea behind PBF Energy and Neste 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.