Correlation Between Laser Photonics and Kone Oyj

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

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

Diversification Opportunities for Laser Photonics and Kone Oyj

0.62

Correlation Coefficient

Laser Photonics  Kone Oyj

Poor diversification

The 3 months correlation between Laser and Kone is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Laser Photonics and Kone Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kone Oyj ADR and Laser Photonics 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 Laser Photonics 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 ADR has no effect on the direction of Laser Photonics i.e., Laser Photonics and Kone Oyj go up and down completely randomly.

Pair Corralation between Laser Photonics and Kone Oyj

Given the investment horizon of 90 days Laser Photonics is expected to generate 12.11 times more return on investment than Kone Oyj. However, Laser Photonics is 12.11 times more volatile than Kone Oyj ADR. It trades about 0.13 of its potential returns per unit of risk. Kone Oyj ADR is currently generating about 0.0 per unit of risk. If you would invest  190.00  in Laser Photonics on September 29, 2024 and sell it today you would earn a total of  452.00  from holding Laser Photonics or generate 237.89% return on investment over 90 days.

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

Laser Photonics  vs.  Kone Oyj ADR

Laser Photonics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laser Photonics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 abnormal performance in the last few months, the Stock's forward-looking indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Laser Photonics and Kone Oyj

The main advantage of trading using opposite Laser Photonics and Kone Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laser Photonics 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 Laser Photonics and Kone Oyj ADR 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.