Correlation Between Finnair Oyj and Naked Wines

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

By analyzing existing cross correlation between Finnair Oyj and Naked Wines plc, you can compare the effects of market volatilities on Finnair Oyj and Naked Wines 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 Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finnair Oyj and Naked Wines.

Diversification Opportunities for Finnair Oyj and Naked Wines

0.43

Correlation Coefficient

Finnair Oyj  Naked Wines

Very weak diversification

The 3 months correlation between Finnair and Naked is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines plc 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 Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and Naked Wines go up and down completely randomly.

Pair Corralation between Finnair Oyj and Naked Wines

Assuming the 90 days trading horizon Finnair Oyj is expected to generate 0.96 times more return on investment than Naked Wines. However, Finnair Oyj is 1.04 times less risky than Naked Wines. It trades about 0.15 of its potential returns per unit of risk. Naked Wines plc is currently generating about 0.02 per unit of risk. If you would invest  228.00  in Finnair Oyj on September 12, 2024 and sell it today you would earn a total of  16.00  from holding Finnair Oyj or generate 7.02% return on investment over 90 days.

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

Finnair Oyj  vs.  Naked Wines plc

Finnair Oyj

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Finnair Oyj are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Finnair Oyj may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Naked Wines plc

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Naked Wines may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Finnair Oyj and Naked Wines

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

The idea behind Finnair Oyj and Naked Wines plc 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.