Correlation Between KONE Oyj and Nokian Renkaat

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Can any of the company-specific risk be diversified away by investing in both KONE Oyj and Nokian Renkaat 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 Nokian Renkaat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KONE Oyj and Nokian Renkaat Oyj, you can compare the effects of market volatilities on KONE Oyj and Nokian Renkaat 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 Nokian Renkaat. Check out your portfolio center. Please also check ongoing floating volatility patterns of KONE Oyj and Nokian Renkaat.

Diversification Opportunities for KONE Oyj and Nokian Renkaat

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between KONE and Nokian is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and Nokian Renkaat Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokian Renkaat 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 Nokian Renkaat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokian Renkaat Oyj has no effect on the direction of KONE Oyj i.e., KONE Oyj and Nokian Renkaat go up and down completely randomly.

Pair Corralation between KONE Oyj and Nokian Renkaat

Assuming the 90 days trading horizon KONE Oyj is expected to under-perform the Nokian Renkaat. But the stock apears to be less risky and, when comparing its historical volatility, KONE Oyj is 1.17 times less risky than Nokian Renkaat. The stock trades about -0.27 of its potential returns per unit of risk. The Nokian Renkaat Oyj is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  755.00  in Nokian Renkaat Oyj on October 8, 2024 and sell it today you would lose (15.00) from holding Nokian Renkaat Oyj or give up 1.99% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

KONE Oyj  vs.  Nokian Renkaat Oyj

 Performance 
       Timeline  
KONE Oyj 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Nokian Renkaat Oyj 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nokian Renkaat 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.

KONE Oyj and Nokian Renkaat Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KONE Oyj and Nokian Renkaat

The main advantage of trading using opposite KONE Oyj and Nokian Renkaat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KONE Oyj position performs unexpectedly, Nokian Renkaat 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 Nokian Renkaat will offset losses from the drop in Nokian Renkaat's long position.
The idea behind KONE Oyj and Nokian Renkaat 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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