Correlation Between Nanoform Finland and Nexstim Oyj

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

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

Diversification Opportunities for Nanoform Finland and Nexstim Oyj

-0.6

Correlation Coefficient

Nanoform Finland  Nexstim Oyj

Excellent diversification

The 3 months correlation between Nanoform and Nexstim is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Nanoform Finland Plc and Nexstim Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstim Oyj and Nanoform Finland 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 Nanoform Finland Plc are associated (or correlated) with Nexstim Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstim Oyj has no effect on the direction of Nanoform Finland i.e., Nanoform Finland and Nexstim Oyj go up and down completely randomly.

Pair Corralation between Nanoform Finland and Nexstim Oyj

Assuming the 90 days trading horizon Nanoform Finland Plc is expected to under-perform the Nexstim Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Nanoform Finland Plc is 1.0 times less risky than Nexstim Oyj. The stock trades about -0.07 of its potential returns per unit of risk. The Nexstim Oyj is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  428.00  in Nexstim Oyj on September 28, 2024 and sell it today you would earn a total of  408.00  from holding Nexstim Oyj or generate 95.33% return on investment over 90 days.

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

Nanoform Finland Plc  vs.  Nexstim Oyj

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.

Nexstim Oyj

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nexstim Oyj are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Nexstim Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nanoform Finland and Nexstim Oyj

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

The idea behind Nanoform Finland Plc and Nexstim 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.