Correlation Between American Express and Finnair Oyj

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

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

Diversification Opportunities for American Express and Finnair Oyj

-0.74

Correlation Coefficient

American Express  Finnair Oyj

Pay attention - limited upside

The 3 months correlation between American and Finnair is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding American Express Co and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj and American Express 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 American Express Co are associated (or correlated) with Finnair Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finnair Oyj has no effect on the direction of American Express i.e., American Express and Finnair Oyj go up and down completely randomly.

Pair Corralation between American Express and Finnair Oyj

Assuming the 90 days trading horizon American Express Co is expected to generate 0.43 times more return on investment than Finnair Oyj. However, American Express Co is 2.35 times less risky than Finnair Oyj. It trades about 0.09 of its potential returns per unit of risk. Finnair Oyj is currently generating about -0.05 per unit of risk. If you would invest  15,565  in American Express Co on October 5, 2024 and sell it today you would earn a total of  14,198  from holding American Express Co or generate 91.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.79%
Values	Daily Returns

American Express Co  vs.  Finnair Oyj

American Express

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Express Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with American Express and Finnair Oyj

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

The idea behind American Express Co and Finnair Oyj 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.