Correlation Between Nokian Renkaat and QPR Software

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

Diversification Opportunities for Nokian Renkaat and QPR Software

-0.27

Correlation Coefficient

Nokian Renkaat  QPR Software

Very good diversification

The 3 months correlation between Nokian and QPR is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Nokian Renkaat Oyj and QPR Software Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QPR Software 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 QPR Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QPR Software Oyj has no effect on the direction of Nokian Renkaat i.e., Nokian Renkaat and QPR Software go up and down completely randomly.

Pair Corralation between Nokian Renkaat and QPR Software

Assuming the 90 days trading horizon Nokian Renkaat Oyj is expected to under-perform the QPR Software. But the stock apears to be less risky and, when comparing its historical volatility, Nokian Renkaat Oyj is 2.3 times less risky than QPR Software. The stock trades about -0.01 of its potential returns per unit of risk. The QPR Software Oyj is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  56.00  in QPR Software Oyj on October 8, 2024 and sell it today you would earn a total of  34.00  from holding QPR Software Oyj or generate 60.71% return on investment over 90 days.

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

Nokian Renkaat Oyj  vs.  QPR Software 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.

QPR Software Oyj

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in QPR Software Oyj are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, QPR Software demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nokian Renkaat and QPR Software

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

The idea behind Nokian Renkaat Oyj and QPR Software 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.