Correlation Between Cisco Systems and Nokia Oyj

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

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

Diversification Opportunities for Cisco Systems and Nokia Oyj

-0.11

Correlation Coefficient

Cisco Systems  Nokia Oyj

Good diversification

The 3 months correlation between Cisco and Nokia is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Nokia Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia Oyj and Cisco Systems 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 Cisco Systems are associated (or correlated) with Nokia Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia Oyj has no effect on the direction of Cisco Systems i.e., Cisco Systems and Nokia Oyj go up and down completely randomly.

Pair Corralation between Cisco Systems and Nokia Oyj

Assuming the 90 days trading horizon Cisco Systems is expected to generate 1.23 times more return on investment than Nokia Oyj. However, Cisco Systems is 1.23 times more volatile than Nokia Oyj. It trades about 0.17 of its potential returns per unit of risk. Nokia Oyj is currently generating about -0.11 per unit of risk. If you would invest  6,330  in Cisco Systems on April 24, 2025 and sell it today you would earn a total of  1,240  from holding Cisco Systems or generate 19.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cisco Systems  vs.  Nokia Oyj

Cisco Systems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Cisco Systems sustained solid returns over the last few months and may actually be approaching a breakup point.

Nokia Oyj

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nokia Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Cisco Systems and Nokia Oyj

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

The idea behind Cisco Systems and Nokia Oyj 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.