Correlation Between Tatry Mountain and Nokia Oyj

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

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

Diversification Opportunities for Tatry Mountain and Nokia Oyj

0.41

Correlation Coefficient

Tatry Mountain  Nokia Oyj

Very weak diversification

The 3 months correlation between Tatry and Nokia is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Tatry Mountain Resorts and Nokia Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia Oyj and Tatry Mountain 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 Tatry Mountain Resorts are associated (or correlated) with Nokia Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia Oyj has no effect on the direction of Tatry Mountain i.e., Tatry Mountain and Nokia Oyj go up and down completely randomly.

Pair Corralation between Tatry Mountain and Nokia Oyj

Assuming the 90 days trading horizon Tatry Mountain is expected to generate 22.44 times less return on investment than Nokia Oyj. But when comparing it to its historical volatility, Tatry Mountain Resorts is 1.29 times less risky than Nokia Oyj. It trades about 0.01 of its potential returns per unit of risk. Nokia Oyj is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  10,373  in Nokia Oyj on December 30, 2024 and sell it today you would earn a total of  1,827  from holding Nokia Oyj or generate 17.61% return on investment over 90 days.

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

Tatry Mountain Resorts  vs.  Nokia Oyj

Tatry Mountain Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tatry Mountain Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Tatry Mountain is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Nokia Oyj

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nokia Oyj are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Nokia Oyj reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tatry Mountain and Nokia Oyj

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

The idea behind Tatry Mountain Resorts and Nokia 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.