Correlation Between Nokian Renkaat and Zeon

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

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

Diversification Opportunities for Nokian Renkaat and Zeon

-0.68

Correlation Coefficient

Nokian Renkaat  Zeon

Excellent diversification

The 3 months correlation between Nokian and Zeon is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Nokian Renkaat Oyj and Zeon Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zeon and Nokian Renkaat 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 Nokian Renkaat Oyj are associated (or correlated) with Zeon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zeon has no effect on the direction of Nokian Renkaat i.e., Nokian Renkaat and Zeon go up and down completely randomly.

Pair Corralation between Nokian Renkaat and Zeon

Assuming the 90 days horizon Nokian Renkaat Oyj is expected to under-perform the Zeon. But the stock apears to be less risky and, when comparing its historical volatility, Nokian Renkaat Oyj is 1.11 times less risky than Zeon. The stock trades about -0.01 of its potential returns per unit of risk. The Zeon Corporation is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  925.00  in Zeon Corporation on September 23, 2024 and sell it today you would lose (55.00) from holding Zeon Corporation or give up 5.95% of portfolio value over 90 days.

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

Nokian Renkaat Oyj  vs.  Zeon Corp.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Zeon

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zeon Corporation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zeon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nokian Renkaat and Zeon

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

The idea behind Nokian Renkaat Oyj and Zeon Corporation 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.