Correlation Between EcoUp Oyj and KONE Oyj

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

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

Diversification Opportunities for EcoUp Oyj and KONE Oyj

0.69

Correlation Coefficient

EcoUp Oyj  KONE Oyj

Poor diversification

The 3 months correlation between EcoUp and KONE is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding EcoUp Oyj and KONE Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KONE Oyj and EcoUp 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 EcoUp Oyj 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 EcoUp Oyj i.e., EcoUp Oyj and KONE Oyj go up and down completely randomly.

Pair Corralation between EcoUp Oyj and KONE Oyj

Assuming the 90 days trading horizon EcoUp Oyj is expected to generate 3.46 times more return on investment than KONE Oyj. However, EcoUp Oyj is 3.46 times more volatile than KONE Oyj. It trades about -0.01 of its potential returns per unit of risk. KONE Oyj is currently generating about -0.04 per unit of risk. If you would invest  195.00  in EcoUp Oyj on September 15, 2024 and sell it today you would lose (16.00) from holding EcoUp Oyj or give up 8.21% of portfolio value over 90 days.

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

EcoUp Oyj  vs.  KONE Oyj

EcoUp Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite EcoUp Oyj and KONE Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EcoUp Oyj 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 EcoUp Oyj 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.

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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.