Correlation Between Wartsila Oyj and Nokia Oyj

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

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

Diversification Opportunities for Wartsila Oyj and Nokia Oyj

-0.26

Correlation Coefficient

Wartsila Oyj  Nokia Oyj

Very good diversification

The 3 months correlation between Wartsila and Nokia is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Wartsila Oyj Abp and Nokia Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia Oyj and Wartsila Oyj 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 Wartsila Oyj Abp 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 Wartsila Oyj i.e., Wartsila Oyj and Nokia Oyj go up and down completely randomly.

Pair Corralation between Wartsila Oyj and Nokia Oyj

Assuming the 90 days trading horizon Wartsila Oyj is expected to generate 6.2 times less return on investment than Nokia Oyj. In addition to that, Wartsila Oyj is 1.66 times more volatile than Nokia Oyj. It trades about 0.01 of its total potential returns per unit of risk. Nokia Oyj is currently generating about 0.15 per unit of volatility. If you would invest  421.00  in Nokia Oyj on October 8, 2024 and sell it today you would earn a total of  8.00  from holding Nokia Oyj or generate 1.9% return on investment over 90 days.

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

Wartsila Oyj Abp  vs.  Nokia Oyj

Wartsila Oyj Abp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wartsila Oyj Abp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent 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.

Nokia Oyj

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nokia Oyj are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Nokia Oyj may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Wartsila Oyj and Nokia Oyj

The main advantage of trading using opposite Wartsila Oyj and Nokia Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wartsila Oyj 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 Wartsila Oyj Abp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.