Correlation Between SSAB AB and Fortum Oyj

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

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

Diversification Opportunities for SSAB AB and Fortum Oyj

0.27

Correlation Coefficient

SSAB AB  Fortum Oyj

Modest diversification

The 3 months correlation between SSAB and Fortum is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SSAB AB ser and Fortum Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj and SSAB AB 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 SSAB AB ser 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 SSAB AB i.e., SSAB AB and Fortum Oyj go up and down completely randomly.

Pair Corralation between SSAB AB and Fortum Oyj

Assuming the 90 days trading horizon SSAB AB ser is expected to under-perform the Fortum Oyj. In addition to that, SSAB AB is 1.6 times more volatile than Fortum Oyj. It trades about -0.11 of its total potential returns per unit of risk. Fortum Oyj is currently generating about -0.07 per unit of volatility. If you would invest  1,423  in Fortum Oyj on September 28, 2024 and sell it today you would lose (100.00) from holding Fortum Oyj or give up 7.03% of portfolio value over 90 days.

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

SSAB AB ser  vs.  Fortum Oyj

SSAB AB ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSAB AB ser 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with SSAB AB and Fortum Oyj

The main advantage of trading using opposite SSAB AB and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSAB AB 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 SSAB AB ser 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.