Correlation Between Computershare and Nokia

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

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

Diversification Opportunities for Computershare and Nokia

0.46

Correlation Coefficient

Computershare  Nokia

Very weak diversification

The 3 months correlation between Computershare and Nokia is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Computershare Limited and Nokia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia and Computershare 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 Computershare Limited are associated (or correlated) with Nokia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia has no effect on the direction of Computershare i.e., Computershare and Nokia go up and down completely randomly.

Pair Corralation between Computershare and Nokia

Assuming the 90 days horizon Computershare Limited is expected to generate 1.19 times more return on investment than Nokia. However, Computershare is 1.19 times more volatile than Nokia. It trades about 0.12 of its potential returns per unit of risk. Nokia is currently generating about 0.11 per unit of risk. If you would invest  1,979  in Computershare Limited on December 24, 2024 and sell it today you would earn a total of  361.00  from holding Computershare Limited or generate 18.24% return on investment over 90 days.

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

Computershare Limited  vs.  Nokia

Computershare Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Computershare reported solid returns over the last few months and may actually be approaching a breakup point.

Nokia

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nokia are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Nokia reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Computershare and Nokia

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

The idea behind Computershare Limited and Nokia 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.