Correlation Between Atlas Copco and Kone Oyj

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

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

Diversification Opportunities for Atlas Copco and Kone Oyj

0.88

Correlation Coefficient

Atlas Copco  Kone Oyj

Very poor diversification

The 3 months correlation between Atlas and Kone is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco ADR and Kone Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kone Oyj ADR and Atlas Copco 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 Atlas Copco ADR are associated (or correlated) with Kone Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kone Oyj ADR has no effect on the direction of Atlas Copco i.e., Atlas Copco and Kone Oyj go up and down completely randomly.

Pair Corralation between Atlas Copco and Kone Oyj

Assuming the 90 days horizon Atlas Copco ADR is expected to under-perform the Kone Oyj. In addition to that, Atlas Copco is 1.16 times more volatile than Kone Oyj ADR. It trades about -0.03 of its total potential returns per unit of risk. Kone Oyj ADR is currently generating about -0.02 per unit of volatility. If you would invest  2,691  in Kone Oyj ADR on September 5, 2024 and sell it today you would lose (79.00) from holding Kone Oyj ADR or give up 2.94% of portfolio value over 90 days.

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

Atlas Copco ADR  vs.  Kone Oyj ADR

Atlas Copco ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlas Copco ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Atlas Copco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kone Oyj ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kone Oyj ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking indicators, Kone Oyj is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Atlas Copco and Kone Oyj

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

The idea behind Atlas Copco ADR and Kone Oyj ADR 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.