Correlation Between Nokia and Keyence
Can any of the company-specific risk be diversified away by investing in both Nokia and Keyence 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 Nokia and Keyence into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nokia and Keyence, you can compare the effects of market volatilities on Nokia and Keyence 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 Nokia with a short position of Keyence. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nokia and Keyence.
Diversification Opportunities for Nokia and Keyence
Excellent diversification
The 3 months correlation between Nokia and Keyence is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Nokia and Keyence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyence and Nokia 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 Nokia are associated (or correlated) with Keyence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keyence has no effect on the direction of Nokia i.e., Nokia and Keyence go up and down completely randomly.
Pair Corralation between Nokia and Keyence
Assuming the 90 days trading horizon Nokia is expected to generate 1.21 times more return on investment than Keyence. However, Nokia is 1.21 times more volatile than Keyence. It trades about 0.08 of its potential returns per unit of risk. Keyence is currently generating about -0.08 per unit of risk. If you would invest 388.00 in Nokia on September 27, 2024 and sell it today you would earn a total of 35.00 from holding Nokia or generate 9.02% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Nokia vs. Keyence
Performance |
Timeline |
Nokia |
Keyence |
Nokia and Keyence Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nokia and Keyence
The main advantage of trading using opposite Nokia and Keyence positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nokia position performs unexpectedly, Keyence 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 Keyence will offset losses from the drop in Keyence's long position.The idea behind Nokia and Keyence 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.Keyence vs. Keysight Technologies | Keyence vs. HEXAGON AB ADR1 | Keyence vs. Fortive | Keyence vs. Teledyne Technologies Incorporated |
Check out your portfolio center.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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