Correlation Between Cargotec Oyj and Kesko Oyj

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

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

Diversification Opportunities for Cargotec Oyj and Kesko Oyj

0.71

Correlation Coefficient

Cargotec Oyj  Kesko Oyj

Poor diversification

The 3 months correlation between Cargotec and Kesko is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Cargotec Oyj and Kesko Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kesko Oyj 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 Kesko Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kesko Oyj has no effect on the direction of Cargotec Oyj i.e., Cargotec Oyj and Kesko Oyj go up and down completely randomly.

Pair Corralation between Cargotec Oyj and Kesko Oyj

Assuming the 90 days trading horizon Cargotec Oyj is expected to generate 1.58 times more return on investment than Kesko Oyj. However, Cargotec Oyj is 1.58 times more volatile than Kesko Oyj. It trades about 0.13 of its potential returns per unit of risk. Kesko Oyj is currently generating about 0.06 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  824.00  from holding Cargotec Oyj or generate 18.06% return on investment over 90 days.

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

Cargotec Oyj  vs.  Kesko Oyj

Cargotec Oyj

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cargotec Oyj are ranked lower than 9 (%) 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.

Kesko Oyj

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kesko Oyj are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kesko Oyj is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cargotec Oyj and Kesko Oyj

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

The idea behind Cargotec Oyj and Kesko 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.