Correlation Between Nokia and Grupo Herdez

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

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

Diversification Opportunities for Nokia and Grupo Herdez

-0.05

Correlation Coefficient

Nokia  Grupo Herdez

Good diversification

The 3 months correlation between Nokia and Grupo is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Nokia and Grupo Herdez SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Herdez SAB and Nokia 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 are associated (or correlated) with Grupo Herdez. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Herdez SAB has no effect on the direction of Nokia i.e., Nokia and Grupo Herdez go up and down completely randomly.

Pair Corralation between Nokia and Grupo Herdez

Assuming the 90 days trading horizon Nokia is expected to generate 1.0 times more return on investment than Grupo Herdez. However, Nokia is 1.0 times less risky than Grupo Herdez. It trades about 0.22 of its potential returns per unit of risk. Grupo Herdez SAB is currently generating about 0.08 per unit of risk. If you would invest  8,600  in Nokia on September 24, 2024 and sell it today you would earn a total of  900.00  from holding Nokia or generate 10.47% return on investment over 90 days.

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

Nokia  vs.  Grupo Herdez SAB

Nokia

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nokia are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Nokia showed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Herdez SAB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Herdez SAB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Grupo Herdez 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 and Grupo Herdez

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

The idea behind Nokia and Grupo Herdez SAB 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.