Correlation Between Vallourec and Nokia Oyj

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

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

Diversification Opportunities for Vallourec and Nokia Oyj

0.07

Correlation Coefficient

Vallourec  Nokia Oyj

Significant diversification

The 3 months correlation between Vallourec and Nokia is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Vallourec and Nokia Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia Oyj and Vallourec 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 Vallourec are associated (or correlated) with Nokia Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia Oyj has no effect on the direction of Vallourec i.e., Vallourec and Nokia Oyj go up and down completely randomly.

Pair Corralation between Vallourec and Nokia Oyj

Assuming the 90 days horizon Vallourec is expected to generate 1.7 times less return on investment than Nokia Oyj. In addition to that, Vallourec is 1.18 times more volatile than Nokia Oyj. It trades about 0.07 of its total potential returns per unit of risk. Nokia Oyj is currently generating about 0.13 per unit of volatility. If you would invest  423.00  in Nokia Oyj on December 31, 2024 and sell it today you would earn a total of  62.00  from holding Nokia Oyj or generate 14.66% return on investment over 90 days.

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

Vallourec  vs.  Nokia Oyj

Vallourec

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vallourec are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vallourec may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Nokia Oyj

Risk-Adjusted Performance

OK

Over the last 90 days Nokia Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, Nokia Oyj reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vallourec and Nokia Oyj

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

The idea behind Vallourec and Nokia 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.