Correlation Between Nokia Oyj and Trade Desk

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Can any of the company-specific risk be diversified away by investing in both Nokia Oyj and Trade Desk 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 Oyj and Trade Desk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nokia Oyj and The Trade Desk, you can compare the effects of market volatilities on Nokia Oyj and Trade Desk 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 Oyj with a short position of Trade Desk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nokia Oyj and Trade Desk.

Diversification Opportunities for Nokia Oyj and Trade Desk

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Nokia and Trade is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nokia Oyj and The Trade Desk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trade Desk and Nokia 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 Nokia Oyj are associated (or correlated) with Trade Desk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trade Desk has no effect on the direction of Nokia Oyj i.e., Nokia Oyj and Trade Desk go up and down completely randomly.

Pair Corralation between Nokia Oyj and Trade Desk

Assuming the 90 days trading horizon Nokia Oyj is expected to generate 6.71 times less return on investment than Trade Desk. In addition to that, Nokia Oyj is 1.01 times more volatile than The Trade Desk. It trades about 0.04 of its total potential returns per unit of risk. The Trade Desk is currently generating about 0.28 per unit of volatility. If you would invest  575.00  in The Trade Desk on September 5, 2024 and sell it today you would earn a total of  266.00  from holding The Trade Desk or generate 46.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Nokia Oyj  vs.  The Trade Desk

 Performance 
       Timeline  
Nokia Oyj 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Nokia Oyj are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Nokia Oyj is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Trade Desk 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in The Trade Desk are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Trade Desk sustained solid returns over the last few months and may actually be approaching a breakup point.

Nokia Oyj and Trade Desk Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nokia Oyj and Trade Desk

The main advantage of trading using opposite Nokia Oyj and Trade Desk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nokia Oyj position performs unexpectedly, Trade Desk 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 Trade Desk will offset losses from the drop in Trade Desk's long position.
The idea behind Nokia Oyj and The Trade Desk 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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