Correlation Between EasyJet Plc and Finnair Oyj

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

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

Diversification Opportunities for EasyJet Plc and Finnair Oyj

-0.43

Correlation Coefficient

EasyJet Plc  Finnair Oyj

Very good diversification

The 3 months correlation between EasyJet and Finnair is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding easyJet plc and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj and EasyJet Plc 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 easyJet plc 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 EasyJet Plc i.e., EasyJet Plc and Finnair Oyj go up and down completely randomly.

Pair Corralation between EasyJet Plc and Finnair Oyj

Assuming the 90 days horizon easyJet plc is expected to under-perform the Finnair Oyj. But the pink sheet apears to be less risky and, when comparing its historical volatility, easyJet plc is 2.84 times less risky than Finnair Oyj. The pink sheet trades about -0.03 of its potential returns per unit of risk. The 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 30, 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 Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

easyJet plc  vs.  Finnair Oyj

easyJet plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days easyJet plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, EasyJet Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Finnair Oyj

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Finnair Oyj are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Finnair Oyj reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EasyJet Plc and Finnair Oyj

The main advantage of trading using opposite EasyJet Plc and Finnair Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EasyJet Plc 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 easyJet plc 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.