Correlation Between Metso Oyj and KONE Oyj

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

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

Diversification Opportunities for Metso Oyj and KONE Oyj

0.54

Correlation Coefficient

Metso Oyj  KONE Oyj

Very weak diversification

The 3 months correlation between Metso and KONE is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Metso Oyj and KONE Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KONE Oyj and Metso 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 Metso Oyj are associated (or correlated) with KONE Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KONE Oyj has no effect on the direction of Metso Oyj i.e., Metso Oyj and KONE Oyj go up and down completely randomly.

Pair Corralation between Metso Oyj and KONE Oyj

Assuming the 90 days trading horizon Metso Oyj is expected to generate 1.31 times less return on investment than KONE Oyj. In addition to that, Metso Oyj is 1.38 times more volatile than KONE Oyj. It trades about 0.0 of its total potential returns per unit of risk. KONE Oyj is currently generating about 0.01 per unit of volatility. If you would invest  4,732  in KONE Oyj on October 10, 2024 and sell it today you would lose (27.00) from holding KONE Oyj or give up 0.57% of portfolio value over 90 days.

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

Metso Oyj  vs.  KONE Oyj

Metso Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metso Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Metso Oyj is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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 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.

Pair Trading with Metso Oyj and KONE Oyj

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

The idea behind Metso Oyj and KONE 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.