Correlation Between Nokia and Tokyu Construction

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

By analyzing existing cross correlation between Nokia and Tokyu Construction Co, you can compare the effects of market volatilities on Nokia and Tokyu Construction 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 Tokyu Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nokia and Tokyu Construction.

Diversification Opportunities for Nokia and Tokyu Construction

-0.75

Correlation Coefficient

Nokia  Tokyu Construction

Pay attention - limited upside

The 3 months correlation between Nokia and Tokyu is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nokia and Tokyu Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyu Construction 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 Tokyu Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyu Construction has no effect on the direction of Nokia i.e., Nokia and Tokyu Construction go up and down completely randomly.

Pair Corralation between Nokia and Tokyu Construction

Assuming the 90 days trading horizon Nokia is expected to generate 2.06 times more return on investment than Tokyu Construction. However, Nokia is 2.06 times more volatile than Tokyu Construction Co. It trades about 0.08 of its potential returns per unit of risk. Tokyu Construction Co is currently generating about -0.03 per unit of risk. If you would invest  390.00  in Nokia on September 30, 2024 and sell it today you would earn a total of  33.00  from holding Nokia or generate 8.46% return on investment over 90 days.

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

Nokia  vs.  Tokyu Construction Co

Nokia

Risk-Adjusted Performance

6 of 100

Modest

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

Tokyu Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokyu Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tokyu Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nokia and Tokyu Construction

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

The idea behind Nokia and Tokyu Construction Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.