Correlation Between Ampol and Neste Oyj

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

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

Diversification Opportunities for Ampol and Neste Oyj

-0.33

Correlation Coefficient

Ampol  Neste Oyj

Very good diversification

The 3 months correlation between Ampol and Neste is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ampol Ltd ADR and Neste Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neste Oyj and Ampol 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 Ampol Ltd ADR 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 Ampol i.e., Ampol and Neste Oyj go up and down completely randomly.

Pair Corralation between Ampol and Neste Oyj

Assuming the 90 days horizon Ampol Ltd ADR is expected to under-perform the Neste Oyj. But the pink sheet apears to be less risky and, when comparing its historical volatility, Ampol Ltd ADR is 2.06 times less risky than Neste Oyj. The pink sheet trades about -0.42 of its potential returns per unit of risk. The Neste Oyj is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,338  in Neste Oyj on February 4, 2024 and sell it today you would lose (150.60) from holding Neste Oyj or give up 11.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Ampol Ltd ADR  vs.  Neste Oyj

Ampol Ltd ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ampol Ltd ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Ampol is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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. In spite of unsteady performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ampol and Neste Oyj

The main advantage of trading using opposite Ampol and Neste Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ampol 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 Ampol Ltd ADR 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 Commodity Directory module to find actively traded commodities issued by global exchanges.