Correlation Between IDEX and KONE Oyj

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

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

Diversification Opportunities for IDEX and KONE Oyj

-0.07

Correlation Coefficient

IDEX  KONE Oyj

Good diversification

The 3 months correlation between IDEX and KONE is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. and KONE Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KONE Oyj and IDEX 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 IDEX Corporation 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 IDEX i.e., IDEX and KONE Oyj go up and down completely randomly.

Pair Corralation between IDEX and KONE Oyj

Considering the 90-day investment horizon IDEX Corporation is expected to generate 0.79 times more return on investment than KONE Oyj. However, IDEX Corporation is 1.26 times less risky than KONE Oyj. It trades about 0.18 of its potential returns per unit of risk. KONE Oyj is currently generating about 0.03 per unit of risk. If you would invest  19,612  in IDEX Corporation on September 5, 2024 and sell it today you would earn a total of  3,438  from holding IDEX Corporation or generate 17.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

IDEX Corp.  vs.  KONE Oyj

IDEX

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IDEX Corporation are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, IDEX showed solid returns over the last few months and may actually be approaching a breakup point.

KONE Oyj

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KONE Oyj are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, KONE Oyj is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IDEX and KONE Oyj

The main advantage of trading using opposite IDEX and KONE Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX 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 IDEX Corporation 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.