Correlation Between Cargotec Oyj and Konecranes Plc

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

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

Diversification Opportunities for Cargotec Oyj and Konecranes Plc

0.41

Correlation Coefficient

Cargotec Oyj  Konecranes Plc

Very weak diversification

The 3 months correlation between Cargotec and Konecranes is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Cargotec Oyj and Konecranes Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Konecranes Plc and Cargotec Oyj 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 Cargotec Oyj are associated (or correlated) with Konecranes Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Konecranes Plc has no effect on the direction of Cargotec Oyj i.e., Cargotec Oyj and Konecranes Plc go up and down completely randomly.

Pair Corralation between Cargotec Oyj and Konecranes Plc

Assuming the 90 days trading horizon Cargotec Oyj is expected to generate 1.35 times more return on investment than Konecranes Plc. However, Cargotec Oyj is 1.35 times more volatile than Konecranes Plc. It trades about 0.13 of its potential returns per unit of risk. Konecranes Plc is currently generating about 0.1 per unit of risk. If you would invest  4,562  in Cargotec Oyj on September 14, 2024 and sell it today you would earn a total of  857.00  from holding Cargotec Oyj or generate 18.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Cargotec Oyj  vs.  Konecranes Plc

Cargotec Oyj

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cargotec Oyj are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Cargotec Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Konecranes Plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Konecranes Plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Konecranes Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cargotec Oyj and Konecranes Plc

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

The idea behind Cargotec Oyj and Konecranes Plc 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.