Correlation Between Nokia Oyj and Aiforia Technologies

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

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

Diversification Opportunities for Nokia Oyj and Aiforia Technologies

0.21

Correlation Coefficient

Nokia Oyj  Aiforia Technologies

Modest diversification

The 3 months correlation between Nokia and Aiforia is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Nokia Oyj and Aiforia Technologies Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aiforia Technologies Oyj and Nokia Oyj 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 Oyj are associated (or correlated) with Aiforia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aiforia Technologies Oyj has no effect on the direction of Nokia Oyj i.e., Nokia Oyj and Aiforia Technologies go up and down completely randomly.

Pair Corralation between Nokia Oyj and Aiforia Technologies

Assuming the 90 days trading horizon Nokia Oyj is expected to generate 0.49 times more return on investment than Aiforia Technologies. However, Nokia Oyj is 2.03 times less risky than Aiforia Technologies. It trades about 0.38 of its potential returns per unit of risk. Aiforia Technologies Oyj is currently generating about 0.02 per unit of risk. If you would invest  398.00  in Nokia Oyj on September 29, 2024 and sell it today you would earn a total of  31.00  from holding Nokia Oyj or generate 7.79% return on investment over 90 days.

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

Nokia Oyj  vs.  Aiforia Technologies Oyj

Nokia Oyj

Risk-Adjusted Performance

7 of 100

OK

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

Aiforia Technologies Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aiforia Technologies Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Aiforia Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nokia Oyj and Aiforia Technologies

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

The idea behind Nokia Oyj and Aiforia Technologies 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.