Correlation Between Visa and Nokia
Can any of the company-specific risk be diversified away by investing in both Visa and Nokia 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 Visa and Nokia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Nokia, you can compare the effects of market volatilities on Visa and Nokia 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 Visa with a short position of Nokia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Nokia.
Diversification Opportunities for Visa and Nokia
Very weak diversification
The 3 months correlation between Visa and Nokia is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Nokia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia and Visa 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 Visa Class A are associated (or correlated) with Nokia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia has no effect on the direction of Visa i.e., Visa and Nokia go up and down completely randomly.
Pair Corralation between Visa and Nokia
Taking into account the 90-day investment horizon Visa is expected to generate 2.03 times less return on investment than Nokia. But when comparing it to its historical volatility, Visa Class A is 2.0 times less risky than Nokia. It trades about 0.11 of its potential returns per unit of risk. Nokia is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 6,314 in Nokia on August 30, 2024 and sell it today you would earn a total of 2,186 from holding Nokia or generate 34.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Nokia
Performance |
| Timeline |
| Visa Class A |
| Nokia |
Visa and Nokia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Nokia
The main advantage of trading using opposite Visa and Nokia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Nokia 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 will offset losses from the drop in Nokia's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Nokia vs. McEwen Mining | Nokia vs. Taiwan Semiconductor Manufacturing | Nokia vs. Verizon Communications | Nokia vs. Costco Wholesale |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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