Correlation Between KONE Oyj and Finnair Oyj
Can any of the company-specific risk be diversified away by investing in both KONE Oyj and Finnair 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 KONE Oyj and Finnair Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KONE Oyj and Finnair Oyj, you can compare the effects of market volatilities on KONE Oyj and Finnair 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 KONE Oyj with a short position of Finnair Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of KONE Oyj and Finnair Oyj.
Diversification Opportunities for KONE Oyj and Finnair Oyj
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KONE and Finnair is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj 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 Finnair Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finnair Oyj has no effect on the direction of KONE Oyj i.e., KONE Oyj and Finnair Oyj go up and down completely randomly.
Pair Corralation between KONE Oyj and Finnair Oyj
Assuming the 90 days trading horizon KONE Oyj is expected to under-perform the Finnair Oyj. But the stock apears to be less risky and, when comparing its historical volatility, KONE Oyj is 1.69 times less risky than Finnair Oyj. The stock trades about -0.04 of its potential returns per unit of risk. The Finnair Oyj is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 237.00 in Finnair Oyj on September 17, 2024 and sell it today you would lose (6.00) from holding Finnair Oyj or give up 2.53% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
KONE Oyj vs. Finnair Oyj
Performance |
Timeline |
KONE Oyj |
Finnair Oyj |
KONE Oyj and Finnair Oyj Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KONE Oyj and Finnair Oyj
The main advantage of trading using opposite KONE Oyj and Finnair Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KONE Oyj position performs unexpectedly, Finnair 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 Finnair Oyj will offset losses from the drop in Finnair Oyj's long position.KONE Oyj vs. Sampo Oyj A | KONE Oyj vs. Fortum Oyj | KONE Oyj vs. UPM Kymmene Oyj | KONE Oyj vs. Neste Oil Oyj |
Finnair Oyj vs. Telefonaktiebolaget LM Ericsson | Finnair Oyj vs. KONE Oyj | Finnair Oyj vs. Nordea Bank Abp | Finnair Oyj vs. TietoEVRY Corp |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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