Correlation Between Nokian Renkaat and Raisio Oyj

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

Diversification Opportunities for Nokian Renkaat and Raisio Oyj

0.12

Correlation Coefficient

Nokian Renkaat  Raisio Oyj

Average diversification

The 3 months correlation between Nokian and Raisio is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Nokian Renkaat Oyj and Raisio Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raisio 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 Raisio Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raisio Oyj has no effect on the direction of Nokian Renkaat i.e., Nokian Renkaat and Raisio Oyj go up and down completely randomly.

Pair Corralation between Nokian Renkaat and Raisio Oyj

Assuming the 90 days trading horizon Nokian Renkaat Oyj is expected to under-perform the Raisio Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Nokian Renkaat Oyj is 1.46 times less risky than Raisio Oyj. The stock trades about -0.07 of its potential returns per unit of risk. The Raisio Oyj is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  220.00  in Raisio Oyj on October 23, 2024 and sell it today you would earn a total of  0.00  from holding Raisio Oyj or generate 0.0% return on investment over 90 days.

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

Nokian Renkaat Oyj  vs.  Raisio 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 fairly strong technical indicators, Nokian Renkaat is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Raisio Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raisio Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Raisio Oyj 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 Raisio Oyj

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

The idea behind Nokian Renkaat Oyj and Raisio 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.