Correlation Between Bytes Technology and Finnair Oyj

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

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

Diversification Opportunities for Bytes Technology and Finnair Oyj

0.18

Correlation Coefficient

Bytes Technology  Finnair Oyj

Average diversification

The 3 months correlation between Bytes and Finnair is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Bytes Technology and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj and Bytes Technology 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 Bytes Technology 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 Bytes Technology i.e., Bytes Technology and Finnair Oyj go up and down completely randomly.

Pair Corralation between Bytes Technology and Finnair Oyj

Assuming the 90 days trading horizon Bytes Technology is expected to generate 2.37 times less return on investment than Finnair Oyj. But when comparing it to its historical volatility, Bytes Technology is 1.26 times less risky than Finnair Oyj. It trades about 0.12 of its potential returns per unit of risk. Finnair Oyj is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  218.00  in Finnair Oyj on December 30, 2024 and sell it today you would earn a total of  126.00  from holding Finnair Oyj or generate 57.8% return on investment over 90 days.

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

Bytes Technology  vs.  Finnair Oyj

Bytes Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bytes Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Bytes Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Finnair Oyj

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Finnair Oyj are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Finnair Oyj unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bytes Technology and Finnair Oyj

The main advantage of trading using opposite Bytes Technology and Finnair Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bytes Technology 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 Bytes Technology 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.