Correlation Between KONE Oyj and Vestas Wind

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

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

Diversification Opportunities for KONE Oyj and Vestas Wind

0.56

Correlation Coefficient

KONE Oyj  Vestas Wind

Very weak diversification

The 3 months correlation between KONE and Vestas is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of KONE Oyj i.e., KONE Oyj and Vestas Wind go up and down completely randomly.

Pair Corralation between KONE Oyj and Vestas Wind

Assuming the 90 days horizon KONE Oyj is expected to generate 1.95 times less return on investment than Vestas Wind. But when comparing it to its historical volatility, KONE Oyj is 2.72 times less risky than Vestas Wind. It trades about 0.07 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,362  in Vestas Wind Systems on December 29, 2024 and sell it today you would earn a total of  89.00  from holding Vestas Wind Systems or generate 6.53% return on investment over 90 days.

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

KONE Oyj  vs.  Vestas Wind Systems

KONE Oyj

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KONE Oyj are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, KONE Oyj is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Vestas Wind Systems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vestas Wind Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vestas Wind may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KONE Oyj and Vestas Wind

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

The idea behind KONE Oyj and Vestas Wind Systems 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.