Correlation Between DATAGROUP and Nokia
Can any of the company-specific risk be diversified away by investing in both DATAGROUP 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 DATAGROUP and Nokia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DATAGROUP SE and Nokia, you can compare the effects of market volatilities on DATAGROUP 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 DATAGROUP with a short position of Nokia. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATAGROUP and Nokia.
Diversification Opportunities for DATAGROUP and Nokia
Good diversification
The 3 months correlation between DATAGROUP and Nokia is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding DATAGROUP SE and Nokia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia and DATAGROUP 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 DATAGROUP SE 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 DATAGROUP i.e., DATAGROUP and Nokia go up and down completely randomly.
Pair Corralation between DATAGROUP and Nokia
Assuming the 90 days trading horizon DATAGROUP is expected to generate 1.1 times less return on investment than Nokia. In addition to that, DATAGROUP is 1.3 times more volatile than Nokia. It trades about 0.06 of its total potential returns per unit of risk. Nokia is currently generating about 0.08 per unit of volatility. If you would invest 395.00 in Nokia on October 5, 2024 and sell it today you would earn a total of 35.00 from holding Nokia or generate 8.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
DATAGROUP SE vs. Nokia
Performance |
Timeline |
DATAGROUP SE |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Nokia |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
DATAGROUP and Nokia Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with DATAGROUP and Nokia
The main advantage of trading using opposite DATAGROUP and Nokia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DATAGROUP 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 DATAGROUP SE 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.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 Global Correlations module to find global opportunities by holding instruments from different markets.
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