Correlation Between Vestas Wind and KONE Oyj

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

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

Diversification Opportunities for Vestas Wind and KONE Oyj

0.53

Correlation Coefficient

Vestas Wind  KONE Oyj

Very weak diversification

The 3 months correlation between Vestas and KONE is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and KONE Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KONE Oyj and Vestas Wind 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 Vestas Wind Systems 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 Vestas Wind i.e., Vestas Wind and KONE Oyj go up and down completely randomly.

Pair Corralation between Vestas Wind and KONE Oyj

Assuming the 90 days horizon Vestas Wind Systems is expected to generate 2.72 times more return on investment than KONE Oyj. However, Vestas Wind is 2.72 times more volatile than KONE Oyj. It trades about 0.05 of its potential returns per unit of risk. KONE Oyj is currently generating about 0.07 per unit of risk. 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

Vestas Wind Systems  vs.  KONE Oyj

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.

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.

Pair Trading with Vestas Wind and KONE Oyj

The main advantage of trading using opposite Vestas Wind and KONE Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind 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 Vestas Wind Systems 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.