Correlation Between Promotora and Nokia

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

By analyzing existing cross correlation between Promotora y Operadora and Nokia, you can compare the effects of market volatilities on Promotora and Nokia 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 Promotora with a short position of Nokia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Promotora and Nokia.

Diversification Opportunities for Promotora and Nokia

-0.16

Correlation Coefficient

Promotora  Nokia

Good diversification

The 3 months correlation between Promotora and Nokia is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Promotora y Operadora and Nokia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia and Promotora 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 Promotora y Operadora are associated (or correlated) with Nokia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia has no effect on the direction of Promotora i.e., Promotora and Nokia go up and down completely randomly.

Pair Corralation between Promotora and Nokia

Assuming the 90 days trading horizon Promotora y Operadora is expected to generate 0.6 times more return on investment than Nokia. However, Promotora y Operadora is 1.68 times less risky than Nokia. It trades about 0.08 of its potential returns per unit of risk. Nokia is currently generating about 0.04 per unit of risk. If you would invest  17,344  in Promotora y Operadora on September 15, 2024 and sell it today you would earn a total of  1,246  from holding Promotora y Operadora or generate 7.18% return on investment over 90 days.

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

Promotora y Operadora  vs.  Nokia

Promotora y Operadora

Risk-Adjusted Performance

6 of 100

Modest

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

Nokia

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nokia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Nokia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Promotora and Nokia

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

The idea behind Promotora y Operadora and Nokia 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.