Correlation Between KONE Oyj and Telia Company

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

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

Diversification Opportunities for KONE Oyj and Telia Company

0.37

Correlation Coefficient

KONE Oyj  Telia Company

Weak diversification

The 3 months correlation between KONE and Telia is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company 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 Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of KONE Oyj i.e., KONE Oyj and Telia Company go up and down completely randomly.

Pair Corralation between KONE Oyj and Telia Company

Assuming the 90 days trading horizon KONE Oyj is expected to generate 1.5 times less return on investment than Telia Company. But when comparing it to its historical volatility, KONE Oyj is 1.01 times less risky than Telia Company. It trades about 0.05 of its potential returns per unit of risk. Telia Company AB is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  215.00  in Telia Company AB on September 15, 2024 and sell it today you would earn a total of  50.00  from holding Telia Company AB or generate 23.26% 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.  Telia Company AB

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 fairly strong technical indicators, KONE Oyj is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Telia Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telia Company AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with KONE Oyj and Telia Company

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

The idea behind KONE Oyj and Telia Company AB 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.