Correlation Between Nokian Tyres and Compagnie Gnrale
Can any of the company-specific risk be diversified away by investing in both Nokian Tyres and Compagnie Gnrale 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 Nokian Tyres and Compagnie Gnrale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nokian Tyres Plc and Compagnie Gnrale des, you can compare the effects of market volatilities on Nokian Tyres and Compagnie Gnrale 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 Nokian Tyres with a short position of Compagnie Gnrale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nokian Tyres and Compagnie Gnrale.
Diversification Opportunities for Nokian Tyres and Compagnie Gnrale
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nokian and Compagnie is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nokian Tyres Plc and Compagnie Gnrale des in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Gnrale des and Nokian Tyres 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 Nokian Tyres Plc are associated (or correlated) with Compagnie Gnrale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Gnrale des has no effect on the direction of Nokian Tyres i.e., Nokian Tyres and Compagnie Gnrale go up and down completely randomly.
Pair Corralation between Nokian Tyres and Compagnie Gnrale
Assuming the 90 days horizon Nokian Tyres Plc is expected to generate 1.68 times more return on investment than Compagnie Gnrale. However, Nokian Tyres is 1.68 times more volatile than Compagnie Gnrale des. It trades about 0.03 of its potential returns per unit of risk. Compagnie Gnrale des is currently generating about -0.41 per unit of risk. If you would invest 471.00 in Nokian Tyres Plc on January 20, 2024 and sell it today you would earn a total of 3.00 from holding Nokian Tyres Plc or generate 0.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Nokian Tyres Plc vs. Compagnie Gnrale des
Performance |
| Timeline |
| Nokian Tyres Plc |
| Compagnie Gnrale des |
Nokian Tyres and Compagnie Gnrale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nokian Tyres and Compagnie Gnrale
The main advantage of trading using opposite Nokian Tyres and Compagnie Gnrale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nokian Tyres position performs unexpectedly, Compagnie Gnrale 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 Compagnie Gnrale will offset losses from the drop in Compagnie Gnrale's long position.The idea behind Nokian Tyres Plc and Compagnie Gnrale des 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.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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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