Correlation Between Boreo Oyj and KONE Oyj

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

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

Diversification Opportunities for Boreo Oyj and KONE Oyj

0.73

Correlation Coefficient

Boreo Oyj  KONE Oyj

Poor diversification

The 3 months correlation between Boreo and KONE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Boreo Oyj and KONE Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KONE Oyj and Boreo 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 Boreo Oyj 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 Boreo Oyj i.e., Boreo Oyj and KONE Oyj go up and down completely randomly.

Pair Corralation between Boreo Oyj and KONE Oyj

Assuming the 90 days trading horizon Boreo Oyj is expected to generate 3.29 times more return on investment than KONE Oyj. However, Boreo Oyj is 3.29 times more volatile than KONE Oyj. It trades about 0.11 of its potential returns per unit of risk. KONE Oyj is currently generating about 0.17 per unit of risk. If you would invest  1,095  in Boreo Oyj on December 30, 2024 and sell it today you would earn a total of  290.00  from holding Boreo Oyj or generate 26.48% return on investment over 90 days.

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

Boreo Oyj  vs.  KONE Oyj

Boreo Oyj

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boreo Oyj are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Boreo Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

KONE Oyj

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KONE Oyj are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, KONE Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boreo Oyj and KONE Oyj

The main advantage of trading using opposite Boreo Oyj and KONE Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boreo Oyj 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 Boreo Oyj 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.