Correlation Between KONE Oyj and Flowserve
Can any of the company-specific risk be diversified away by investing in both KONE Oyj and Flowserve 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 Flowserve into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KONE Oyj and Flowserve, you can compare the effects of market volatilities on KONE Oyj and Flowserve 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 Flowserve. Check out your portfolio center. Please also check ongoing floating volatility patterns of KONE Oyj and Flowserve.
Diversification Opportunities for KONE Oyj and Flowserve
Modest diversification
The 3 months correlation between KONE and Flowserve is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and Flowserve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowserve 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 Flowserve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowserve has no effect on the direction of KONE Oyj i.e., KONE Oyj and Flowserve go up and down completely randomly.
Pair Corralation between KONE Oyj and Flowserve
Assuming the 90 days horizon KONE Oyj is expected to under-perform the Flowserve. But the pink sheet apears to be less risky and, when comparing its historical volatility, KONE Oyj is 1.2 times less risky than Flowserve. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Flowserve is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,928 in Flowserve on August 29, 2024 and sell it today you would earn a total of 1,145 from holding Flowserve or generate 23.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KONE Oyj vs. Flowserve
Performance |
| Timeline |
| KONE Oyj |
| Flowserve |
KONE Oyj and Flowserve Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KONE Oyj and Flowserve
The main advantage of trading using opposite KONE Oyj and Flowserve positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KONE Oyj position performs unexpectedly, Flowserve 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 Flowserve will offset losses from the drop in Flowserve's long position.| KONE Oyj vs. Spirax Sarco Engineering PLC | KONE Oyj vs. Atlas Copco ADR | KONE Oyj vs. Vestas Wind Systems | KONE Oyj vs. IDEX Corporation |
| Flowserve vs. IDEX Corporation | Flowserve vs. Donaldson | Flowserve vs. Ingersoll Rand | Flowserve vs. Franklin Electric Co |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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