Correlation Between Kone Oyj and Generac Holdings

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

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

Diversification Opportunities for Kone Oyj and Generac Holdings

-0.43

Correlation Coefficient

Kone Oyj  Generac Holdings

Very good diversification

The 3 months correlation between Kone and Generac is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Kone Oyj ADR and Generac Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generac Holdings 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 ADR are associated (or correlated) with Generac Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generac Holdings has no effect on the direction of Kone Oyj i.e., Kone Oyj and Generac Holdings go up and down completely randomly.

Pair Corralation between Kone Oyj and Generac Holdings

Assuming the 90 days horizon Kone Oyj ADR is expected to under-perform the Generac Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Kone Oyj ADR is 1.22 times less risky than Generac Holdings. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Generac Holdings is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  17,074  in Generac Holdings on September 5, 2024 and sell it today you would earn a total of  1,612  from holding Generac Holdings or generate 9.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Kone Oyj ADR  vs.  Generac Holdings

Kone Oyj ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kone Oyj ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking indicators, Kone Oyj is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Generac Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Generac Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Generac Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kone Oyj and Generac Holdings

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

The idea behind Kone Oyj ADR and Generac Holdings 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.