Correlation Between KONE Oyj and Elecster Oyj

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

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

Diversification Opportunities for KONE Oyj and Elecster Oyj

0.86

Correlation Coefficient

KONE Oyj  Elecster Oyj

Very poor diversification

The 3 months correlation between KONE and Elecster is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and Elecster Oyj A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elecster Oyj A and KONE 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 KONE Oyj are associated (or correlated) with Elecster Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elecster Oyj A has no effect on the direction of KONE Oyj i.e., KONE Oyj and Elecster Oyj go up and down completely randomly.

Pair Corralation between KONE Oyj and Elecster Oyj

Assuming the 90 days trading horizon KONE Oyj is expected to generate 1.16 times less return on investment than Elecster Oyj. But when comparing it to its historical volatility, KONE Oyj is 1.53 times less risky than Elecster Oyj. It trades about 0.11 of its potential returns per unit of risk. Elecster Oyj A is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  304.00  in Elecster Oyj A on October 24, 2024 and sell it today you would earn a total of  6.00  from holding Elecster Oyj A or generate 1.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.12%
Values	Daily Returns

KONE Oyj  vs.  Elecster Oyj A

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 inconsistent performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Elecster Oyj A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elecster Oyj A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with KONE Oyj and Elecster Oyj

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

The idea behind KONE Oyj and Elecster Oyj A 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.