Correlation Between KONE Oyj and QPR Software

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

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

Diversification Opportunities for KONE Oyj and QPR Software

0.36

Correlation Coefficient

KONE Oyj  QPR Software

Weak diversification

The 3 months correlation between KONE and QPR is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and QPR Software Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QPR Software Oyj 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 QPR Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QPR Software Oyj has no effect on the direction of KONE Oyj i.e., KONE Oyj and QPR Software go up and down completely randomly.

Pair Corralation between KONE Oyj and QPR Software

Assuming the 90 days trading horizon KONE Oyj is expected to generate 8.54 times less return on investment than QPR Software. But when comparing it to its historical volatility, KONE Oyj is 4.59 times less risky than QPR Software. It trades about 0.14 of its potential returns per unit of risk. QPR Software Oyj is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  55.00  in QPR Software Oyj on December 2, 2024 and sell it today you would earn a total of  55.00  from holding QPR Software Oyj or generate 100.0% return on investment over 90 days.

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

KONE Oyj  vs.  QPR Software Oyj

KONE Oyj

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KONE Oyj are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, KONE Oyj may actually be approaching a critical reversion point that can send shares even higher in April 2025.

QPR Software Oyj

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in QPR Software Oyj are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, QPR Software demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KONE Oyj and QPR Software

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

The idea behind KONE Oyj and QPR Software 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.