Correlation Between Nokian Renkaat and Kojamo

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

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

Diversification Opportunities for Nokian Renkaat and Kojamo

0.45

Correlation Coefficient

Nokian Renkaat  Kojamo

Very weak diversification

The 3 months correlation between Nokian and Kojamo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Nokian Renkaat Oyj and Kojamo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kojamo and Nokian Renkaat 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 Nokian Renkaat Oyj are associated (or correlated) with Kojamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kojamo has no effect on the direction of Nokian Renkaat i.e., Nokian Renkaat and Kojamo go up and down completely randomly.

Pair Corralation between Nokian Renkaat and Kojamo

Assuming the 90 days trading horizon Nokian Renkaat Oyj is expected to generate 0.77 times more return on investment than Kojamo. However, Nokian Renkaat Oyj is 1.29 times less risky than Kojamo. It trades about -0.1 of its potential returns per unit of risk. Kojamo is currently generating about -0.09 per unit of risk. If you would invest  755.00  in Nokian Renkaat Oyj on October 8, 2024 and sell it today you would lose (15.00) from holding Nokian Renkaat Oyj or give up 1.99% of portfolio value over 90 days.

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

Nokian Renkaat Oyj  vs.  Kojamo

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 latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Kojamo

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nokian Renkaat and Kojamo

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

The idea behind Nokian Renkaat Oyj and Kojamo 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.