Correlation Between Nokia Corp and Ciena Corp

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

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

Diversification Opportunities for Nokia Corp and Ciena Corp

0.32

Correlation Coefficient

Nokia Corp  Ciena Corp

Weak diversification

The 3 months correlation between Nokia and Ciena is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Nokia Corp ADR and Ciena Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ciena Corp and Nokia Corp 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 Corp ADR are associated (or correlated) with Ciena Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ciena Corp has no effect on the direction of Nokia Corp i.e., Nokia Corp and Ciena Corp go up and down completely randomly.

Pair Corralation between Nokia Corp and Ciena Corp

Considering the 90-day investment horizon Nokia Corp ADR is expected to under-perform the Ciena Corp. But the stock apears to be less risky and, when comparing its historical volatility, Nokia Corp ADR is 1.22 times less risky than Ciena Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Ciena Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,517  in Ciena Corp on January 19, 2024 and sell it today you would lose (1,140) from holding Ciena Corp or give up 20.66% of portfolio value over 90 days.

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

Nokia Corp ADR  vs.  Ciena Corp

Nokia Corp ADR

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nokia Corp ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Nokia Corp is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Ciena Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ciena Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Nokia Corp and Ciena Corp

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

The idea behind Nokia Corp ADR and Ciena Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.