Correlation Between Near and Nokian Tyres

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

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

Diversification Opportunities for Near and Nokian Tyres

0.39

Correlation Coefficient

Near  Nokian Tyres

Weak diversification

The 3 months correlation between Near and Nokian is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Near and Nokian Tyres Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokian Tyres Plc and Near 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 Near are associated (or correlated) with Nokian Tyres. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokian Tyres Plc has no effect on the direction of Near i.e., Near and Nokian Tyres go up and down completely randomly.

Pair Corralation between Near and Nokian Tyres

Assuming the 90 days trading horizon Near is expected to generate 4.07 times more return on investment than Nokian Tyres. However, Near is 4.07 times more volatile than Nokian Tyres Plc. It trades about 0.14 of its potential returns per unit of risk. Nokian Tyres Plc is currently generating about 0.01 per unit of risk. If you would invest  621.00  in Near on January 30, 2024 and sell it today you would earn a total of  92.00  from holding Near or generate 14.81% return on investment over 90 days.

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

Near  vs.  Nokian Tyres Plc

Near

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Near are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Near exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nokian Tyres Plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nokian Tyres Plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking signals, Nokian Tyres is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Near and Nokian Tyres

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

The idea behind Near and Nokian Tyres Plc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.