Correlation Between Wartsila Oyj and Konecranes Plc

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

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

Diversification Opportunities for Wartsila Oyj and Konecranes Plc

0.41

Correlation Coefficient

Wartsila Oyj  Konecranes Plc

Very weak diversification

The 3 months correlation between Wartsila and Konecranes is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Wartsila Oyj Abp and Konecranes Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Konecranes Plc and Wartsila 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 Wartsila Oyj Abp are associated (or correlated) with Konecranes Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Konecranes Plc has no effect on the direction of Wartsila Oyj i.e., Wartsila Oyj and Konecranes Plc go up and down completely randomly.

Pair Corralation between Wartsila Oyj and Konecranes Plc

Assuming the 90 days trading horizon Wartsila Oyj Abp is expected to under-perform the Konecranes Plc. In addition to that, Wartsila Oyj is 1.41 times more volatile than Konecranes Plc. It trades about -0.03 of its total potential returns per unit of risk. Konecranes Plc is currently generating about 0.1 per unit of volatility. If you would invest  5,980  in Konecranes Plc on September 14, 2024 and sell it today you would earn a total of  620.00  from holding Konecranes Plc or generate 10.37% return on investment over 90 days.

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

Wartsila Oyj Abp  vs.  Konecranes Plc

Wartsila Oyj Abp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wartsila Oyj Abp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Wartsila Oyj is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Konecranes Plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Konecranes Plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Konecranes Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wartsila Oyj and Konecranes Plc

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

The idea behind Wartsila Oyj Abp and Konecranes Plc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.