Correlation Between Nokia and Harmonic
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
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 99.6% |
Values | Daily Returns |
Nokia vs. Harmonic
Performance |
Timeline |
Nokia |
Harmonic |
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.Nokia vs. Telefonaktiebolaget LM Ericsson | Nokia vs. Cisco Systems | Nokia vs. Hewlett Packard Enterprise | Nokia vs. Nokia Corp ADR |
Harmonic vs. Desktop Metal | Harmonic vs. Fabrinet | Harmonic vs. Kimball Electronics | Harmonic vs. Knowles Cor |
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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