Correlation Between Alstom SA and Kko International

Can any of the company-specific risk be diversified away by investing in both Alstom SA and Kko International 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 Alstom SA and Kko International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alstom SA and Kko International SA, you can compare the effects of market volatilities on Alstom SA and Kko International 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 Alstom SA with a short position of Kko International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alstom SA and Kko International.

Diversification Opportunities for Alstom SA and Kko International

0.75

Correlation Coefficient

Alstom SA  Kko International

Poor diversification

The 3 months correlation between Alstom and Kko is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Alstom SA and Kko International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kko International and Alstom SA 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 Alstom SA are associated (or correlated) with Kko International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kko International has no effect on the direction of Alstom SA i.e., Alstom SA and Kko International go up and down completely randomly.

Pair Corralation between Alstom SA and Kko International

Assuming the 90 days trading horizon Alstom SA is expected to generate 4.0 times less return on investment than Kko International. But when comparing it to its historical volatility, Alstom SA is 2.07 times less risky than Kko International. It trades about 0.02 of its potential returns per unit of risk. Kko International SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Kko International SA on September 22, 2024 and sell it today you would earn a total of  4.00  from holding Kko International SA or generate 30.77% return on investment over 90 days.

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

Alstom SA  vs.  Kko International SA

Alstom SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alstom SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Alstom SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Kko International

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kko International SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Kko International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alstom SA and Kko International

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

The idea behind Alstom SA and Kko International SA 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.