Correlation Between PG E and Nokian Renkaat
Can any of the company-specific risk be diversified away by investing in both PG E and Nokian Renkaat 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 PG E and Nokian Renkaat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PG E P6 and Nokian Renkaat Oyj, you can compare the effects of market volatilities on PG E and Nokian Renkaat 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 PG E with a short position of Nokian Renkaat. Check out your portfolio center. Please also check ongoing floating volatility patterns of PG E and Nokian Renkaat.
Diversification Opportunities for PG E and Nokian Renkaat
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between PCG6 and Nokian is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding PG E P6 and Nokian Renkaat Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokian Renkaat Oyj and PG E 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 PG E P6 are associated (or correlated) with Nokian Renkaat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokian Renkaat Oyj has no effect on the direction of PG E i.e., PG E and Nokian Renkaat go up and down completely randomly.
Pair Corralation between PG E and Nokian Renkaat
Assuming the 90 days trading horizon PG E P6 is expected to generate 0.73 times more return on investment than Nokian Renkaat. However, PG E P6 is 1.36 times less risky than Nokian Renkaat. It trades about 0.05 of its potential returns per unit of risk. Nokian Renkaat Oyj is currently generating about -0.01 per unit of risk. If you would invest 1,594 in PG E P6 on September 23, 2024 and sell it today you would earn a total of 586.00 from holding PG E P6 or generate 36.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
PG E P6 vs. Nokian Renkaat Oyj
Performance |
Timeline |
PG E P6 |
Nokian Renkaat Oyj |
PG E and Nokian Renkaat Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PG E and Nokian Renkaat
The main advantage of trading using opposite PG E and Nokian Renkaat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PG E position performs unexpectedly, Nokian Renkaat 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 Nokian Renkaat will offset losses from the drop in Nokian Renkaat's long position.The idea behind PG E P6 and Nokian Renkaat 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.Nokian Renkaat vs. Bridgestone | Nokian Renkaat vs. Advanced Drainage Systems | Nokian Renkaat vs. The Goodyear Tire | Nokian Renkaat vs. Sumitomo Rubber Industries |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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