Correlation Between Fortum Oyj and Sampo Oyj

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

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

Diversification Opportunities for Fortum Oyj and Sampo Oyj

-0.45

Correlation Coefficient

Fortum Oyj  Sampo Oyj

Very good diversification

The 3 months correlation between Fortum and Sampo is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fortum Oyj and Sampo Oyj A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sampo Oyj A and Fortum 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 Fortum Oyj are associated (or correlated) with Sampo Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sampo Oyj A has no effect on the direction of Fortum Oyj i.e., Fortum Oyj and Sampo Oyj go up and down completely randomly.

Pair Corralation between Fortum Oyj and Sampo Oyj

Assuming the 90 days trading horizon Fortum Oyj is expected to generate 1.08 times more return on investment than Sampo Oyj. However, Fortum Oyj is 1.08 times more volatile than Sampo Oyj A. It trades about 0.32 of its potential returns per unit of risk. Sampo Oyj A is currently generating about 0.01 per unit of risk. If you would invest  1,146  in Fortum Oyj on February 3, 2024 and sell it today you would earn a total of  142.00  from holding Fortum Oyj or generate 12.39% return on investment over 90 days.

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

Fortum Oyj  vs.  Sampo Oyj A

Fortum Oyj

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortum Oyj are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Fortum Oyj may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Sampo Oyj A

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sampo Oyj A are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Sampo Oyj is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Fortum Oyj and Sampo Oyj

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

The idea behind Fortum Oyj and Sampo Oyj A 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.