Correlation Between Neste Oil and Nokian Renkaat

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

By analyzing existing cross correlation between Neste Oil Oyj and Nokian Renkaat Oyj, you can compare the effects of market volatilities on Neste Oil and Nokian Renkaat 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 Neste Oil with a short position of Nokian Renkaat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neste Oil and Nokian Renkaat.

Diversification Opportunities for Neste Oil and Nokian Renkaat

0.44

Correlation Coefficient

Neste Oil  Nokian Renkaat

Very weak diversification

The 3 months correlation between Neste and Nokian is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oil Oyj and Nokian Renkaat Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokian Renkaat Oyj and Neste Oil 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 Neste Oil Oyj are associated (or correlated) with Nokian Renkaat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokian Renkaat Oyj has no effect on the direction of Neste Oil i.e., Neste Oil and Nokian Renkaat go up and down completely randomly.

Pair Corralation between Neste Oil and Nokian Renkaat

Assuming the 90 days trading horizon Neste Oil Oyj is expected to generate 1.96 times more return on investment than Nokian Renkaat. However, Neste Oil is 1.96 times more volatile than Nokian Renkaat Oyj. It trades about 0.2 of its potential returns per unit of risk. Nokian Renkaat Oyj is currently generating about 0.16 per unit of risk. If you would invest  1,179  in Neste Oil Oyj on October 25, 2024 and sell it today you would earn a total of  96.00  from holding Neste Oil Oyj or generate 8.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.12%
Values	Daily Returns

Neste Oil Oyj  vs.  Nokian Renkaat Oyj

Neste Oil Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neste Oil Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Nokian Renkaat Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nokian Renkaat Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Nokian Renkaat is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Neste Oil and Nokian Renkaat

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

The idea behind Neste Oil Oyj and Nokian Renkaat Oyj 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.