Correlation Between Ubiquiti Networks and Nokia Corp

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

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

Diversification Opportunities for Ubiquiti Networks and Nokia Corp

-0.67

Correlation Coefficient

Ubiquiti Networks  Nokia Corp

Excellent diversification

The 3 months correlation between Ubiquiti and Nokia is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ubiquiti Networks and Nokia Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia Corp ADR and Ubiquiti Networks 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 Ubiquiti Networks are associated (or correlated) with Nokia Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia Corp ADR has no effect on the direction of Ubiquiti Networks i.e., Ubiquiti Networks and Nokia Corp go up and down completely randomly.

Pair Corralation between Ubiquiti Networks and Nokia Corp

Allowing for the 90-day total investment horizon Ubiquiti Networks is expected to under-perform the Nokia Corp. In addition to that, Ubiquiti Networks is 1.76 times more volatile than Nokia Corp ADR. It trades about -0.03 of its total potential returns per unit of risk. Nokia Corp ADR is currently generating about 0.15 per unit of volatility. If you would invest  445.00  in Nokia Corp ADR on December 27, 2024 and sell it today you would earn a total of  75.00  from holding Nokia Corp ADR or generate 16.85% return on investment over 90 days.

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

Ubiquiti Networks  vs.  Nokia Corp ADR

Ubiquiti Networks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ubiquiti Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Nokia Corp ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nokia Corp ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Nokia Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ubiquiti Networks and Nokia Corp

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

The idea behind Ubiquiti Networks and Nokia Corp ADR 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.