Correlation Between Nokia Corp and Ubiquiti Networks

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

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

Diversification Opportunities for Nokia Corp and Ubiquiti Networks

0.12

Correlation Coefficient

Nokia Corp  Ubiquiti Networks

Average diversification

The 3 months correlation between Nokia and Ubiquiti is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Nokia Corp ADR and Ubiquiti Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubiquiti Networks and Nokia Corp 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 Nokia Corp ADR are associated (or correlated) with Ubiquiti Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubiquiti Networks has no effect on the direction of Nokia Corp i.e., Nokia Corp and Ubiquiti Networks go up and down completely randomly.

Pair Corralation between Nokia Corp and Ubiquiti Networks

Considering the 90-day investment horizon Nokia Corp ADR is expected to under-perform the Ubiquiti Networks. But the stock apears to be less risky and, when comparing its historical volatility, Nokia Corp ADR is 1.57 times less risky than Ubiquiti Networks. The stock trades about -0.02 of its potential returns per unit of risk. The Ubiquiti Networks is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  18,908  in Ubiquiti Networks on September 4, 2024 and sell it today you would earn a total of  16,259  from holding Ubiquiti Networks or generate 85.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Nokia Corp ADR  vs.  Ubiquiti Networks

Nokia Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nokia Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Nokia Corp is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Ubiquiti Networks

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Ubiquiti Networks are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Ubiquiti Networks demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nokia Corp and Ubiquiti Networks

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

The idea behind Nokia Corp ADR and Ubiquiti Networks 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.