Correlation Between Hewlett Packard and Nokia

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

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

Diversification Opportunities for Hewlett Packard and Nokia

-0.12

Correlation Coefficient

Hewlett Packard  Nokia

Good diversification

The 3 months correlation between Hewlett and Nokia is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise and Nokia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia and Hewlett Packard 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 Hewlett Packard Enterprise 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 Hewlett Packard i.e., Hewlett Packard and Nokia go up and down completely randomly.

Pair Corralation between Hewlett Packard and Nokia

Assuming the 90 days horizon Hewlett Packard is expected to generate 395.75 times less return on investment than Nokia. In addition to that, Hewlett Packard is 1.31 times more volatile than Nokia. It trades about 0.0 of its total potential returns per unit of risk. Nokia is currently generating about 0.16 per unit of volatility. If you would invest  393.00  in Nokia on November 29, 2024 and sell it today you would earn a total of  75.00  from holding Nokia or generate 19.08% return on investment over 90 days.

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

Hewlett Packard Enterprise  vs.  Nokia

Hewlett Packard Ente

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hewlett Packard Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hewlett Packard is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nokia

Risk-Adjusted Performance

OK

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

Pair Trading with Hewlett Packard and Nokia

The main advantage of trading using opposite Hewlett Packard and Nokia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hewlett Packard 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.

The idea behind Hewlett Packard Enterprise and Nokia 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.