Correlation Between KONE Oyj and Terveystalo

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

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

Diversification Opportunities for KONE Oyj and Terveystalo

-0.33

Correlation Coefficient

KONE Oyj  Terveystalo

Very good diversification

The 3 months correlation between KONE and Terveystalo is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and Terveystalo Oy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terveystalo Oy 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 Terveystalo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terveystalo Oy has no effect on the direction of KONE Oyj i.e., KONE Oyj and Terveystalo go up and down completely randomly.

Pair Corralation between KONE Oyj and Terveystalo

Assuming the 90 days trading horizon KONE Oyj is expected to under-perform the Terveystalo. But the stock apears to be less risky and, when comparing its historical volatility, KONE Oyj is 1.54 times less risky than Terveystalo. The stock trades about -0.34 of its potential returns per unit of risk. The Terveystalo Oy is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,084  in Terveystalo Oy on October 5, 2024 and sell it today you would lose (12.00) from holding Terveystalo Oy or give up 1.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

KONE Oyj  vs.  Terveystalo Oy

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 weak 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.

Terveystalo Oy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Terveystalo Oy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Terveystalo demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KONE Oyj and Terveystalo

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

The idea behind KONE Oyj and Terveystalo Oy 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.