Correlation Between Nokia and Salesforce

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

Diversification Opportunities for Nokia and Salesforce

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between Nokia and Salesforce is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Nokia and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Nokia 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 are associated (or correlated) with Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of Nokia i.e., Nokia and Salesforce go up and down completely randomly.

Pair Corralation between Nokia and Salesforce

Assuming the 90 days horizon Nokia is expected to generate 0.55 times more return on investment than Salesforce. However, Nokia is 1.81 times less risky than Salesforce. It trades about 0.31 of its potential returns per unit of risk. Salesforce is currently generating about 0.06 per unit of risk. If you would invest  435.00  in Nokia on September 5, 2022 and sell it today you would earn a total of  61.00  from holding Nokia or generate 14.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Nokia  vs.  Salesforce

 Performance (%) 
       Timeline  
Nokia 
Nokia Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Nokia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Nokia is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Nokia Price Channel

Salesforce 
Salesforce Performance
0 of 100
Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Salesforce is not utilizing all of its potentials. The newest stock price chaos, may contribute to medium-term losses for the stakeholders.

Salesforce Price Channel

Nokia and Salesforce Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nokia and Salesforce

The main advantage of trading using opposite Nokia and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nokia position performs unexpectedly, Salesforce 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 Salesforce will offset losses from the drop in Salesforce's long position.
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The idea behind Nokia and Salesforce 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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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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