Correlation Between KONE Oyj and GE Aerospace
Can any of the company-specific risk be diversified away by investing in both KONE Oyj and GE Aerospace 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 GE Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KONE Oyj and GE Aerospace, you can compare the effects of market volatilities on KONE Oyj and GE Aerospace 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 GE Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of KONE Oyj and GE Aerospace.
Diversification Opportunities for KONE Oyj and GE Aerospace
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KONE and GE Aerospace is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace 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 GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of KONE Oyj i.e., KONE Oyj and GE Aerospace go up and down completely randomly.
Pair Corralation between KONE Oyj and GE Aerospace
Assuming the 90 days horizon KONE Oyj is expected to under-perform the GE Aerospace. But the pink sheet apears to be less risky and, when comparing its historical volatility, KONE Oyj is 1.24 times less risky than GE Aerospace. The pink sheet trades about -0.02 of its potential returns per unit of risk. The GE Aerospace is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 16,204 in GE Aerospace on September 3, 2024 and sell it today you would earn a total of 2,012 from holding GE Aerospace or generate 12.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KONE Oyj vs. GE Aerospace
Performance |
| Timeline |
| KONE Oyj |
| GE Aerospace |
KONE Oyj and GE Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KONE Oyj and GE Aerospace
The main advantage of trading using opposite KONE Oyj and GE Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KONE Oyj position performs unexpectedly, GE Aerospace 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 GE Aerospace will offset losses from the drop in GE Aerospace's long position.| KONE Oyj vs. Dear Cashmere Holding | KONE Oyj vs. Goff Corp | KONE Oyj vs. Wialan Technologies | KONE Oyj vs. Cgrowth Capital |
| GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton PLC |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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