Correlation Between KONE Oyj and Metso Oyj
Can any of the company-specific risk be diversified away by investing in both KONE Oyj and Metso 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 KONE Oyj and Metso Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KONE Oyj and Metso Oyj, you can compare the effects of market volatilities on KONE Oyj and Metso 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 KONE Oyj with a short position of Metso Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of KONE Oyj and Metso Oyj.
Diversification Opportunities for KONE Oyj and Metso Oyj
Poor diversification
The 3 months correlation between KONE and Metso is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and Metso Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metso 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 Metso Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metso Oyj has no effect on the direction of KONE Oyj i.e., KONE Oyj and Metso Oyj go up and down completely randomly.
Pair Corralation between KONE Oyj and Metso Oyj
Assuming the 90 days trading horizon KONE Oyj is expected to generate 0.56 times more return on investment than Metso Oyj. However, KONE Oyj is 1.79 times less risky than Metso Oyj. It trades about -0.22 of its potential returns per unit of risk. Metso Oyj is currently generating about -0.25 per unit of risk. If you would invest 5,180 in KONE Oyj on August 24, 2024 and sell it today you would lose (331.00) from holding KONE Oyj or give up 6.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KONE Oyj vs. Metso Oyj
Performance |
| Timeline |
| KONE Oyj |
| Metso Oyj |
KONE Oyj and Metso Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KONE Oyj and Metso Oyj
The main advantage of trading using opposite KONE Oyj and Metso Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KONE Oyj position performs unexpectedly, Metso 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 Metso Oyj will offset losses from the drop in Metso Oyj's long position.| KONE Oyj vs. Sampo Oyj A | KONE Oyj vs. Fortum Oyj | KONE Oyj vs. UPM Kymmene Oyj | KONE Oyj vs. Neste Oil Oyj |
| Metso Oyj vs. QPR Software Oyj | Metso Oyj vs. Sotkamo Silver AB | Metso Oyj vs. Remedy Entertainment Oyj | Metso Oyj vs. Detection Technology OY |
Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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