Correlation Between KONE Oyj and Alandsbanken Abp

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

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

Diversification Opportunities for KONE Oyj and Alandsbanken Abp

0.19

Correlation Coefficient

KONE Oyj  Alandsbanken Abp

Average diversification

The 3 months correlation between KONE and Alandsbanken is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and Alandsbanken Abp A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alandsbanken Abp A and KONE 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 KONE Oyj are associated (or correlated) with Alandsbanken Abp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alandsbanken Abp A has no effect on the direction of KONE Oyj i.e., KONE Oyj and Alandsbanken Abp go up and down completely randomly.

Pair Corralation between KONE Oyj and Alandsbanken Abp

Assuming the 90 days trading horizon KONE Oyj is expected to under-perform the Alandsbanken Abp. In addition to that, KONE Oyj is 1.24 times more volatile than Alandsbanken Abp A. It trades about -0.04 of its total potential returns per unit of risk. Alandsbanken Abp A is currently generating about 0.02 per unit of volatility. If you would invest  3,400  in Alandsbanken Abp A on September 15, 2024 and sell it today you would earn a total of  40.00  from holding Alandsbanken Abp A or generate 1.18% return on investment over 90 days.

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

KONE Oyj  vs.  Alandsbanken Abp A

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.

Alandsbanken Abp A

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alandsbanken Abp A are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Alandsbanken Abp is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with KONE Oyj and Alandsbanken Abp

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

The idea behind KONE Oyj and Alandsbanken Abp A 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.