Correlation Between Neste Oyj and Rubis SCA

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

By analyzing existing cross correlation between Neste Oyj and Rubis SCA ADR, you can compare the effects of market volatilities on Neste Oyj and Rubis SCA 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 Rubis SCA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neste Oyj and Rubis SCA.

Diversification Opportunities for Neste Oyj and Rubis SCA

-0.54

Correlation Coefficient

Neste Oyj  Rubis SCA

Excellent diversification

The 3 months correlation between Neste and Rubis is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oyj and Rubis SCA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubis SCA ADR 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 Rubis SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubis SCA ADR has no effect on the direction of Neste Oyj i.e., Neste Oyj and Rubis SCA go up and down completely randomly.

Pair Corralation between Neste Oyj and Rubis SCA

Assuming the 90 days horizon Neste Oyj is expected to under-perform the Rubis SCA. But the pink sheet apears to be less risky and, when comparing its historical volatility, Neste Oyj is 1.03 times less risky than Rubis SCA. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Rubis SCA ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  516.00  in Rubis SCA ADR on February 3, 2024 and sell it today you would earn a total of  126.00  from holding Rubis SCA ADR or generate 24.42% return on investment over 90 days.

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

Neste Oyj  vs.  Rubis SCA ADR

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 unsteady performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Rubis SCA ADR

Risk-Adjusted Performance

11 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rubis SCA ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Rubis SCA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Neste Oyj and Rubis SCA

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

The idea behind Neste Oyj and Rubis SCA ADR 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 Global Correlations module to find global opportunities by holding instruments from different markets.