Correlation Between KONE Oyj and Lassila Tikanoja

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

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

Diversification Opportunities for KONE Oyj and Lassila Tikanoja

0.7

Correlation Coefficient

KONE Oyj  Lassila Tikanoja

Poor diversification

The 3 months correlation between KONE and Lassila is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and Lassila Tikanoja Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lassila Tikanoja 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 Lassila Tikanoja. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lassila Tikanoja Oyj has no effect on the direction of KONE Oyj i.e., KONE Oyj and Lassila Tikanoja go up and down completely randomly.

Pair Corralation between KONE Oyj and Lassila Tikanoja

Assuming the 90 days trading horizon KONE Oyj is expected to generate 1.8 times more return on investment than Lassila Tikanoja. However, KONE Oyj is 1.8 times more volatile than Lassila Tikanoja Oyj. It trades about -0.11 of its potential returns per unit of risk. Lassila Tikanoja Oyj is currently generating about -0.31 per unit of risk. If you would invest  4,913  in KONE Oyj on September 16, 2024 and sell it today you would lose (101.00) from holding KONE Oyj or give up 2.06% 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.  Lassila Tikanoja Oyj

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.

Lassila Tikanoja Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lassila Tikanoja Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with KONE Oyj and Lassila Tikanoja

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

The idea behind KONE Oyj and Lassila Tikanoja 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.