Correlation Between KONE Oyj and Talenom Oyj

Can any of the company-specific risk be diversified away by investing in both KONE Oyj and Talenom 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 Talenom 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 Talenom Oyj, you can compare the effects of market volatilities on KONE Oyj and Talenom 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 Talenom Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of KONE Oyj and Talenom Oyj.

Diversification Opportunities for KONE Oyj and Talenom Oyj

0.22

Correlation Coefficient

KONE Oyj  Talenom Oyj

Modest diversification

The 3 months correlation between KONE and Talenom is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and Talenom Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talenom 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 Talenom Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talenom Oyj has no effect on the direction of KONE Oyj i.e., KONE Oyj and Talenom Oyj go up and down completely randomly.

Pair Corralation between KONE Oyj and Talenom Oyj

Assuming the 90 days trading horizon KONE Oyj is expected to under-perform the Talenom Oyj. But the stock apears to be less risky and, when comparing its historical volatility, KONE Oyj is 2.44 times less risky than Talenom Oyj. The stock trades about -0.19 of its potential returns per unit of risk. The Talenom Oyj is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  411.00  in Talenom Oyj on October 21, 2024 and sell it today you would lose (20.00) from holding Talenom Oyj or give up 4.87% of portfolio value over 90 days.

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

KONE Oyj  vs.  Talenom Oyj

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 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.

Talenom Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talenom Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Talenom Oyj is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KONE Oyj and Talenom Oyj

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

The idea behind KONE Oyj and Talenom 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.