Correlation Between Nightingale Health and Fortum Oyj

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

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

Diversification Opportunities for Nightingale Health and Fortum Oyj

0.76

Correlation Coefficient

Nightingale Health  Fortum Oyj

Poor diversification

The 3 months correlation between Nightingale and Fortum is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Nightingale Health Oyj and Fortum Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj and Nightingale Health 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 Nightingale Health Oyj 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 Nightingale Health i.e., Nightingale Health and Fortum Oyj go up and down completely randomly.

Pair Corralation between Nightingale Health and Fortum Oyj

Assuming the 90 days trading horizon Nightingale Health Oyj is expected to generate 3.21 times more return on investment than Fortum Oyj. However, Nightingale Health is 3.21 times more volatile than Fortum Oyj. It trades about 0.16 of its potential returns per unit of risk. Fortum Oyj is currently generating about 0.26 per unit of risk. If you would invest  108.00  in Nightingale Health Oyj on February 28, 2024 and sell it today you would earn a total of  60.00  from holding Nightingale Health Oyj or generate 55.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Nightingale Health Oyj  vs.  Fortum Oyj

Nightingale Health Oyj

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nightingale Health Oyj are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nightingale Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Fortum Oyj

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fortum Oyj are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Fortum Oyj sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nightingale Health and Fortum Oyj

The main advantage of trading using opposite Nightingale Health and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nightingale Health 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 Nightingale Health Oyj 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.