Correlation Between Nokian Renkaat and Toivo Group

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

Diversification Opportunities for Nokian Renkaat and Toivo Group

0.72

Correlation Coefficient

Nokian Renkaat  Toivo Group

Poor diversification

The 3 months correlation between Nokian and Toivo is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Nokian Renkaat Oyj and Toivo Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toivo 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 Toivo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toivo Group Oyj has no effect on the direction of Nokian Renkaat i.e., Nokian Renkaat and Toivo Group go up and down completely randomly.

Pair Corralation between Nokian Renkaat and Toivo Group

Assuming the 90 days trading horizon Nokian Renkaat Oyj is expected to under-perform the Toivo Group. But the stock apears to be less risky and, when comparing its historical volatility, Nokian Renkaat Oyj is 2.84 times less risky than Toivo Group. The stock trades about -0.1 of its potential returns per unit of risk. The Toivo Group Oyj is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  103.00  in Toivo Group Oyj on October 9, 2024 and sell it today you would lose (1.00) from holding Toivo Group Oyj or give up 0.97% of portfolio value over 90 days.

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

Nokian Renkaat Oyj  vs.  Toivo 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 weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Toivo Group Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Nokian Renkaat Oyj and Toivo 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.