Correlation Between KONE Oyj and Sandvik AB
Can any of the company-specific risk be diversified away by investing in both KONE Oyj and Sandvik AB 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 Sandvik AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KONE Oyj and Sandvik AB ADR, you can compare the effects of market volatilities on KONE Oyj and Sandvik AB 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 Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of KONE Oyj and Sandvik AB.
Diversification Opportunities for KONE Oyj and Sandvik AB
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between KONE and Sandvik is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and Sandvik AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB ADR 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 Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB ADR has no effect on the direction of KONE Oyj i.e., KONE Oyj and Sandvik AB go up and down completely randomly.
Pair Corralation between KONE Oyj and Sandvik AB
Assuming the 90 days horizon KONE Oyj is expected to generate 0.99 times more return on investment than Sandvik AB. However, KONE Oyj is 1.01 times less risky than Sandvik AB. It trades about -0.03 of its potential returns per unit of risk. Sandvik AB ADR is currently generating about -0.08 per unit of risk. If you would invest 5,450 in KONE Oyj on August 29, 2024 and sell it today you would lose (370.00) from holding KONE Oyj or give up 6.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KONE Oyj vs. Sandvik AB ADR
Performance |
| Timeline |
| KONE Oyj |
| Sandvik AB ADR |
KONE Oyj and Sandvik AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KONE Oyj and Sandvik AB
The main advantage of trading using opposite KONE Oyj and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KONE Oyj position performs unexpectedly, Sandvik AB 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 Sandvik AB will offset losses from the drop in Sandvik AB'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 |
| Sandvik AB vs. Parker Hannifin | Sandvik AB vs. Eaton PLC | Sandvik AB vs. Dover | Sandvik AB vs. Illinois Tool Works |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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