Correlation Between Dairy Farm and Nokia

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

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

Diversification Opportunities for Dairy Farm and Nokia

-0.01

Correlation Coefficient

Dairy Farm  Nokia

Good diversification

The 3 months correlation between Dairy and Nokia is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Nokia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia and Dairy Farm 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 Dairy Farm International 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 Dairy Farm i.e., Dairy Farm and Nokia go up and down completely randomly.

Pair Corralation between Dairy Farm and Nokia

Assuming the 90 days trading horizon Dairy Farm International is expected to generate 0.99 times more return on investment than Nokia. However, Dairy Farm International is 1.01 times less risky than Nokia. It trades about 0.08 of its potential returns per unit of risk. Nokia is currently generating about 0.08 per unit of risk. If you would invest  191.00  in Dairy Farm International on October 4, 2024 and sell it today you would earn a total of  19.00  from holding Dairy Farm International or generate 9.95% return on investment over 90 days.

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

Dairy Farm International  vs.  Nokia

Dairy Farm International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Dairy Farm may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Nokia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nokia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Nokia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dairy Farm and Nokia

The main advantage of trading using opposite Dairy Farm and Nokia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm 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 Dairy Farm International 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.