Correlation Between Ford and Nokia Corp

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

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

Diversification Opportunities for Ford and Nokia Corp

0.16

Correlation Coefficient

Ford  Nokia Corp

Average diversification

The 3 months correlation between Ford and Nokia is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nokia Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia Corp ADR and Ford 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 Ford Motor are associated (or correlated) with Nokia Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia Corp ADR has no effect on the direction of Ford i.e., Ford and Nokia Corp go up and down completely randomly.

Pair Corralation between Ford and Nokia Corp

Taking into account the 90-day investment horizon Ford is expected to generate 2.93 times less return on investment than Nokia Corp. In addition to that, Ford is 1.08 times more volatile than Nokia Corp ADR. It trades about 0.05 of its total potential returns per unit of risk. Nokia Corp ADR is currently generating about 0.17 per unit of volatility. If you would invest  444.00  in Nokia Corp ADR on December 26, 2024 and sell it today you would earn a total of  89.00  from holding Nokia Corp ADR or generate 20.05% return on investment over 90 days.

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

Ford Motor  vs.  Nokia Corp ADR

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nokia Corp ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nokia Corp ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Nokia Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Nokia Corp

The main advantage of trading using opposite Ford and Nokia Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Nokia Corp 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 Corp will offset losses from the drop in Nokia Corp's long position.

The idea behind Ford Motor and Nokia Corp ADR 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.