Correlation Between Nokian Renkaat and Purmo Group

Can any of the company-specific risk be diversified away by investing in both Nokian Renkaat and Purmo Group 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 Purmo Group 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 Purmo Group Oyj, you can compare the effects of market volatilities on Nokian Renkaat and Purmo Group 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 Purmo Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nokian Renkaat and Purmo Group.

Diversification Opportunities for Nokian Renkaat and Purmo Group

-0.68

Correlation Coefficient

Nokian Renkaat  Purmo Group

Excellent diversification

The 3 months correlation between Nokian and Purmo is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Nokian Renkaat Oyj and Purmo Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purmo Group Oyj 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 Purmo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purmo Group Oyj has no effect on the direction of Nokian Renkaat i.e., Nokian Renkaat and Purmo Group go up and down completely randomly.

Pair Corralation between Nokian Renkaat and Purmo Group

Assuming the 90 days trading horizon Nokian Renkaat Oyj is expected to under-perform the Purmo Group. In addition to that, Nokian Renkaat is 1.98 times more volatile than Purmo Group Oyj. It trades about -0.1 of its total potential returns per unit of risk. Purmo Group Oyj is currently generating about 0.14 per unit of volatility. If you would invest  1,130  in Purmo Group Oyj on October 8, 2024 and sell it today you would earn a total of  15.00  from holding Purmo Group Oyj or generate 1.33% return on investment over 90 days.

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

Nokian Renkaat Oyj  vs.  Purmo Group Oyj

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.

Purmo Group Oyj

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Purmo Group Oyj are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Purmo Group is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Nokian Renkaat and Purmo Group

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

The idea behind Nokian Renkaat Oyj and Purmo Group 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.