Correlation Between Solteq PLC and Nexstim Oyj

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

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

Diversification Opportunities for Solteq PLC and Nexstim Oyj

-0.29

Correlation Coefficient

Solteq PLC  Nexstim Oyj

Very good diversification

The 3 months correlation between Solteq and Nexstim is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Solteq PLC and Nexstim Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstim Oyj and Solteq PLC 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 Solteq PLC are associated (or correlated) with Nexstim Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstim Oyj has no effect on the direction of Solteq PLC i.e., Solteq PLC and Nexstim Oyj go up and down completely randomly.

Pair Corralation between Solteq PLC and Nexstim Oyj

Assuming the 90 days trading horizon Solteq PLC is expected to under-perform the Nexstim Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Solteq PLC is 1.17 times less risky than Nexstim Oyj. The stock trades about -0.02 of its potential returns per unit of risk. The Nexstim Oyj is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  325.00  in Nexstim Oyj on September 2, 2024 and sell it today you would earn a total of  227.00  from holding Nexstim Oyj or generate 69.85% return on investment over 90 days.

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

Solteq PLC  vs.  Nexstim Oyj

Solteq PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solteq PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Solteq PLC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Nexstim Oyj

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nexstim Oyj are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Nexstim Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solteq PLC and Nexstim Oyj

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

The idea behind Solteq PLC and Nexstim 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.