Correlation Between Finnair Oyj and Air Products

Can any of the company-specific risk be diversified away by investing in both Finnair Oyj and Air Products 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 Finnair Oyj and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Finnair Oyj and Air Products Chemicals, you can compare the effects of market volatilities on Finnair Oyj and Air Products 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 Finnair Oyj with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finnair Oyj and Air Products.

Diversification Opportunities for Finnair Oyj and Air Products

-0.47

Correlation Coefficient

Finnair Oyj  Air Products

Very good diversification

The 3 months correlation between Finnair and Air is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and Air Products Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products Chemicals and Finnair 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 Finnair Oyj are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products Chemicals has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and Air Products go up and down completely randomly.

Pair Corralation between Finnair Oyj and Air Products

Assuming the 90 days trading horizon Finnair Oyj is expected to generate 14.22 times less return on investment than Air Products. In addition to that, Finnair Oyj is 1.28 times more volatile than Air Products Chemicals. It trades about 0.0 of its total potential returns per unit of risk. Air Products Chemicals is currently generating about 0.07 per unit of volatility. If you would invest  28,768  in Air Products Chemicals on September 15, 2024 and sell it today you would earn a total of  2,013  from holding Air Products Chemicals or generate 7.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Finnair Oyj  vs.  Air Products Chemicals

Finnair Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Finnair Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Finnair Oyj is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Air Products Chemicals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products Chemicals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Air Products may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Finnair Oyj and Air Products

The main advantage of trading using opposite Finnair Oyj and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finnair Oyj position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.

The idea behind Finnair Oyj and Air Products Chemicals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.