Correlation Between BBS Bioactive and KONE Oyj

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

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

Diversification Opportunities for BBS Bioactive and KONE Oyj

0.71

Correlation Coefficient

BBS Bioactive  KONE Oyj

Poor diversification

The 3 months correlation between BBS and KONE is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BBS Bioactive Bone Substitutes and KONE Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KONE Oyj and BBS Bioactive 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 BBS Bioactive Bone Substitutes 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 has no effect on the direction of BBS Bioactive i.e., BBS Bioactive and KONE Oyj go up and down completely randomly.

Pair Corralation between BBS Bioactive and KONE Oyj

Assuming the 90 days trading horizon BBS Bioactive Bone Substitutes is expected to under-perform the KONE Oyj. In addition to that, BBS Bioactive is 10.85 times more volatile than KONE Oyj. It trades about -0.09 of its total potential returns per unit of risk. KONE Oyj is currently generating about -0.13 per unit of volatility. If you would invest  4,926  in KONE Oyj on September 15, 2024 and sell it today you would lose (114.00) from holding KONE Oyj or give up 2.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

BBS Bioactive Bone Substitutes  vs.  KONE Oyj

BBS Bioactive Bone

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BBS Bioactive Bone Substitutes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

KONE Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KONE Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, KONE Oyj is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with BBS Bioactive and KONE Oyj

The main advantage of trading using opposite BBS Bioactive and KONE Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBS Bioactive 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 BBS Bioactive Bone Substitutes and KONE 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.