Correlation Between KOBE STEEL and Nokia

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

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

Diversification Opportunities for KOBE STEEL and Nokia

-0.43

Correlation Coefficient

KOBE STEEL  Nokia

Very good diversification

The 3 months correlation between KOBE and Nokia is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding KOBE STEEL LTD and Nokia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia and KOBE STEEL 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 KOBE STEEL LTD 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 KOBE STEEL i.e., KOBE STEEL and Nokia go up and down completely randomly.

Pair Corralation between KOBE STEEL and Nokia

Assuming the 90 days trading horizon KOBE STEEL LTD is expected to generate 1.66 times more return on investment than Nokia. However, KOBE STEEL is 1.66 times more volatile than Nokia. It trades about 0.13 of its potential returns per unit of risk. Nokia is currently generating about 0.2 per unit of risk. If you would invest  949.00  in KOBE STEEL LTD on October 8, 2024 and sell it today you would earn a total of  33.00  from holding KOBE STEEL LTD or generate 3.48% return on investment over 90 days.

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

KOBE STEEL LTD  vs.  Nokia

KOBE STEEL LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KOBE STEEL LTD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Nokia

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nokia are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nokia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KOBE STEEL and Nokia

The main advantage of trading using opposite KOBE STEEL and Nokia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KOBE STEEL 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 KOBE STEEL LTD 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..