Correlation Between Netgem SA and Nokia Oyj
Can any of the company-specific risk be diversified away by investing in both Netgem SA and Nokia 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 Netgem SA and Nokia Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netgem SA and Nokia Oyj, you can compare the effects of market volatilities on Netgem SA and Nokia 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 Netgem SA with a short position of Nokia Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netgem SA and Nokia Oyj.
Diversification Opportunities for Netgem SA and Nokia Oyj
Poor diversification
The 3 months correlation between Netgem and Nokia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Netgem SA and Nokia Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia Oyj and Netgem SA 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 Netgem SA are associated (or correlated) with Nokia Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia Oyj has no effect on the direction of Netgem SA i.e., Netgem SA and Nokia Oyj go up and down completely randomly.
Pair Corralation between Netgem SA and Nokia Oyj
Assuming the 90 days trading horizon Netgem SA is expected to generate 1.7 times more return on investment than Nokia Oyj. However, Netgem SA is 1.7 times more volatile than Nokia Oyj. It trades about 0.06 of its potential returns per unit of risk. Nokia Oyj is currently generating about 0.08 per unit of risk. If you would invest 91.00 in Netgem SA on August 27, 2024 and sell it today you would earn a total of 19.00 from holding Netgem SA or generate 20.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netgem SA vs. Nokia Oyj
Performance |
| Timeline |
| Netgem SA |
| Nokia Oyj |
Netgem SA and Nokia Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netgem SA and Nokia Oyj
The main advantage of trading using opposite Netgem SA and Nokia Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netgem SA position performs unexpectedly, Nokia 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 Nokia Oyj will offset losses from the drop in Nokia Oyj's long position.The idea behind Netgem SA and Nokia 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.Check out your portfolio center.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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Money Managers Screen money managers from public funds and ETFs managed around the world |