Correlation Between American Superconductor and KONE Oyj

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

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

Diversification Opportunities for American Superconductor and KONE Oyj

-0.59

Correlation Coefficient

American Superconductor  KONE Oyj

Excellent diversification

The 3 months correlation between American and KONE is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding American Superconductor and KONE Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KONE Oyj and American Superconductor 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 American Superconductor 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 has no effect on the direction of American Superconductor i.e., American Superconductor and KONE Oyj go up and down completely randomly.

Pair Corralation between American Superconductor and KONE Oyj

Given the investment horizon of 90 days American Superconductor is expected to generate 3.48 times more return on investment than KONE Oyj. However, American Superconductor is 3.48 times more volatile than KONE Oyj. It trades about 0.1 of its potential returns per unit of risk. KONE Oyj is currently generating about 0.02 per unit of risk. If you would invest  1,006  in American Superconductor on October 7, 2024 and sell it today you would earn a total of  1,862  from holding American Superconductor or generate 185.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.73%
Values	Daily Returns

American Superconductor  vs.  KONE Oyj

American Superconductor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Superconductor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, American Superconductor exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's forward-looking indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with American Superconductor and KONE Oyj

The main advantage of trading using opposite American Superconductor and KONE Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Superconductor 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 American Superconductor and KONE 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.