Correlation Between Sampo Oyj and Nokian Renkaat

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

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

Diversification Opportunities for Sampo Oyj and Nokian Renkaat

0.64

Correlation Coefficient

Sampo Oyj  Nokian Renkaat

Poor diversification

The 3 months correlation between Sampo and Nokian is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sampo Oyj A 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 Sampo 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 Sampo Oyj A 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 Sampo Oyj i.e., Sampo Oyj and Nokian Renkaat go up and down completely randomly.

Pair Corralation between Sampo Oyj and Nokian Renkaat

Assuming the 90 days trading horizon Sampo Oyj A is expected to generate 0.62 times more return on investment than Nokian Renkaat. However, Sampo Oyj A is 1.62 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 -0.07 per unit of risk. If you would invest  4,040  in Sampo Oyj A on October 24, 2024 and sell it today you would lose (102.00) from holding Sampo Oyj A or give up 2.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Sampo Oyj A  vs.  Nokian Renkaat Oyj

Sampo Oyj A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sampo Oyj A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Sampo Oyj is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

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 fairly strong technical indicators, Nokian Renkaat is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Sampo Oyj and Nokian Renkaat

The main advantage of trading using opposite Sampo Oyj and Nokian Renkaat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sampo Oyj 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 Sampo Oyj A 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .