Correlation Between Neste Oil and KONE Oyj
Can any of the company-specific risk be diversified away by investing in both Neste Oil 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 Neste Oil and KONE Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Neste Oil Oyj and KONE Oyj, you can compare the effects of market volatilities on Neste Oil 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 Neste Oil with a short position of KONE Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neste Oil and KONE Oyj.
Diversification Opportunities for Neste Oil and KONE Oyj
Good diversification
The 3 months correlation between Neste and KONE is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oil Oyj and KONE Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KONE Oyj and Neste Oil 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 Neste Oil Oyj 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 Neste Oil i.e., Neste Oil and KONE Oyj go up and down completely randomly.
Pair Corralation between Neste Oil and KONE Oyj
Assuming the 90 days trading horizon Neste Oil Oyj is expected to generate 2.01 times more return on investment than KONE Oyj. However, Neste Oil is 2.01 times more volatile than KONE Oyj. It trades about -0.07 of its potential returns per unit of risk. KONE Oyj is currently generating about -0.2 per unit of risk. If you would invest 1,494 in Neste Oil Oyj on August 27, 2024 and sell it today you would lose (66.00) from holding Neste Oil Oyj or give up 4.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Neste Oil Oyj vs. KONE Oyj
Performance |
| Timeline |
| Neste Oil Oyj |
| KONE Oyj |
Neste Oil and KONE Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Neste Oil and KONE Oyj
The main advantage of trading using opposite Neste Oil and KONE Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neste Oil 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.| Neste Oil vs. Fortum Oyj | Neste Oil vs. Sampo Oyj A | Neste Oil vs. Nordea Bank Abp | Neste Oil vs. UPM Kymmene Oyj |
| KONE Oyj vs. Aktia Bank Abp | KONE Oyj vs. Alandsbanken Abp B | KONE Oyj vs. Alandsbanken Abp A | KONE Oyj vs. Sampo Oyj A |
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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