Correlation Between Kempower Oyj and Nanoform Finland

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

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

Diversification Opportunities for Kempower Oyj and Nanoform Finland

0.65

Correlation Coefficient

Kempower Oyj  Nanoform Finland

Poor diversification

The 3 months correlation between Kempower and Nanoform is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Kempower Oyj and Nanoform Finland Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanoform Finland Plc and Kempower 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 Kempower Oyj are associated (or correlated) with Nanoform Finland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanoform Finland Plc has no effect on the direction of Kempower Oyj i.e., Kempower Oyj and Nanoform Finland go up and down completely randomly.

Pair Corralation between Kempower Oyj and Nanoform Finland

Assuming the 90 days trading horizon Kempower Oyj is expected to under-perform the Nanoform Finland. But the stock apears to be less risky and, when comparing its historical volatility, Kempower Oyj is 1.07 times less risky than Nanoform Finland. The stock trades about -0.03 of its potential returns per unit of risk. The Nanoform Finland Plc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  280.00  in Nanoform Finland Plc on September 29, 2024 and sell it today you would lose (153.00) from holding Nanoform Finland Plc or give up 54.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Kempower Oyj  vs.  Nanoform Finland Plc

Kempower Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kempower Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Nanoform Finland Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nanoform Finland Plc 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Kempower Oyj and Nanoform Finland

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

The idea behind Kempower Oyj and Nanoform Finland Plc 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.