Correlation Between Nokia and Harmonic

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

Diversification Opportunities for Nokia and Harmonic

0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between Nokia and Harmonic is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nokia and Harmonic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmonic 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 Harmonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmonic has no effect on the direction of Nokia i.e., Nokia and Harmonic go up and down completely randomly.

Pair Corralation between Nokia and Harmonic

Assuming the 90 days horizon Nokia is expected to under-perform the Harmonic. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nokia is 1.46 times less risky than Harmonic. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Harmonic is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,448  in Harmonic on December 29, 2023 and sell it today you would lose (101.00) from holding Harmonic or give up 6.98% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.6%
ValuesDaily Returns

Nokia  vs.  Harmonic

 Performance 
       Timeline  
Nokia 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Nokia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, Nokia may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Harmonic 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Harmonic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Harmonic is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Nokia and Harmonic Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nokia and Harmonic

The main advantage of trading using opposite Nokia and Harmonic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nokia position performs unexpectedly, Harmonic 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 Harmonic will offset losses from the drop in Harmonic's long position.
The idea behind Nokia and Harmonic 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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