Correlation Between UmweltBank and Nokia

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

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

Diversification Opportunities for UmweltBank and Nokia

-0.5

Correlation Coefficient

UmweltBank  Nokia

Very good diversification

The 3 months correlation between UmweltBank and Nokia is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding UmweltBank AG and Nokia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia and UmweltBank 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 UmweltBank AG are associated (or correlated) with Nokia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia has no effect on the direction of UmweltBank i.e., UmweltBank and Nokia go up and down completely randomly.

Pair Corralation between UmweltBank and Nokia

Assuming the 90 days trading horizon UmweltBank AG is expected to generate 1.05 times more return on investment than Nokia. However, UmweltBank is 1.05 times more volatile than Nokia. It trades about 0.04 of its potential returns per unit of risk. Nokia is currently generating about -0.03 per unit of risk. If you would invest  588.00  in UmweltBank AG on October 26, 2024 and sell it today you would earn a total of  22.00  from holding UmweltBank AG or generate 3.74% return on investment over 90 days.

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

UmweltBank AG  vs.  Nokia

UmweltBank AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UmweltBank AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, UmweltBank is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Nokia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nokia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nokia is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with UmweltBank and Nokia

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

The idea behind UmweltBank AG and Nokia 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.