Correlation Between Padtec Holding and Nokia Oyj

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

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

Diversification Opportunities for Padtec Holding and Nokia Oyj

-0.7

Correlation Coefficient

Padtec Holding  Nokia Oyj

Excellent diversification

The 3 months correlation between Padtec and Nokia is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Padtec Holding SA and Nokia Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia Oyj and Padtec Holding 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 Padtec Holding SA are associated (or correlated) with Nokia Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia Oyj has no effect on the direction of Padtec Holding i.e., Padtec Holding and Nokia Oyj go up and down completely randomly.

Pair Corralation between Padtec Holding and Nokia Oyj

Assuming the 90 days trading horizon Padtec Holding SA is expected to under-perform the Nokia Oyj. In addition to that, Padtec Holding is 1.67 times more volatile than Nokia Oyj. It trades about -0.27 of its total potential returns per unit of risk. Nokia Oyj is currently generating about 0.17 per unit of volatility. If you would invest  1,810  in Nokia Oyj on March 14, 2024 and sell it today you would earn a total of  274.00  from holding Nokia Oyj or generate 15.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Padtec Holding SA  vs.  Nokia Oyj

Padtec Holding SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Padtec Holding SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Nokia Oyj

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nokia Oyj are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nokia Oyj sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Padtec Holding and Nokia Oyj

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

The idea behind Padtec Holding SA and Nokia 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.