Correlation Between Air China and Finnair Oyj
Can any of the company-specific risk be diversified away by investing in both Air China 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 Air China and Finnair Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air China Limited and Finnair Oyj, you can compare the effects of market volatilities on Air China 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 Air China with a short position of Finnair Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and Finnair Oyj.
Diversification Opportunities for Air China and Finnair Oyj
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Air and Finnair is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Air China Limited and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj and Air China 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 Air China Limited 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 Air China i.e., Air China and Finnair Oyj go up and down completely randomly.
Pair Corralation between Air China and Finnair Oyj
Assuming the 90 days horizon Air China is expected to generate 32.97 times less return on investment than Finnair Oyj. But when comparing it to its historical volatility, Air China Limited is 1.39 times less risky than Finnair Oyj. It trades about 0.01 of its potential returns per unit of risk. Finnair Oyj is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 235.00 in Finnair Oyj on December 28, 2024 and sell it today you would earn a total of 164.00 from holding Finnair Oyj or generate 69.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 84.13% |
Values | Daily Returns |
Air China Limited vs. Finnair Oyj
Performance |
Timeline |
Air China Limited |
Finnair Oyj |
Air China and Finnair Oyj Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Air China and Finnair Oyj
The main advantage of trading using opposite Air China and Finnair Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China 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.Air China vs. Cebu Air | Air China vs. Finnair Oyj | Air China vs. easyJet plc | Air China vs. Norse Atlantic ASA |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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