Correlation Between Nexstim Oyj and Tokmanni Group

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

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

Diversification Opportunities for Nexstim Oyj and Tokmanni Group

0.08

Correlation Coefficient

Nexstim Oyj  Tokmanni Group

Significant diversification

The 3 months correlation between Nexstim and Tokmanni is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Nexstim Oyj and Tokmanni Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokmanni Group Oyj and Nexstim 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 Nexstim Oyj are associated (or correlated) with Tokmanni Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokmanni Group Oyj has no effect on the direction of Nexstim Oyj i.e., Nexstim Oyj and Tokmanni Group go up and down completely randomly.

Pair Corralation between Nexstim Oyj and Tokmanni Group

Assuming the 90 days trading horizon Nexstim Oyj is expected to generate 1.6 times less return on investment than Tokmanni Group. In addition to that, Nexstim Oyj is 1.92 times more volatile than Tokmanni Group Oyj. It trades about 0.02 of its total potential returns per unit of risk. Tokmanni Group Oyj is currently generating about 0.06 per unit of volatility. If you would invest  1,228  in Tokmanni Group Oyj on December 25, 2024 and sell it today you would earn a total of  69.00  from holding Tokmanni Group Oyj or generate 5.62% return on investment over 90 days.

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

Nexstim Oyj  vs.  Tokmanni Group Oyj

Nexstim Oyj

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nexstim Oyj are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Nexstim Oyj is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Tokmanni Group Oyj

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tokmanni Group Oyj are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward-looking signals, Tokmanni Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nexstim Oyj and Tokmanni Group

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

The idea behind Nexstim Oyj and Tokmanni Group 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.