Correlation Between Finnair Oyj and Sotkamo Silver

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

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

Diversification Opportunities for Finnair Oyj and Sotkamo Silver

0.15

Correlation Coefficient

Finnair Oyj  Sotkamo Silver

Average diversification

The 3 months correlation between Finnair and Sotkamo is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and Sotkamo Silver AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotkamo Silver AB 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 Sotkamo Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sotkamo Silver AB has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and Sotkamo Silver go up and down completely randomly.

Pair Corralation between Finnair Oyj and Sotkamo Silver

Assuming the 90 days trading horizon Finnair Oyj is expected to generate 1.08 times more return on investment than Sotkamo Silver. However, Finnair Oyj is 1.08 times more volatile than Sotkamo Silver AB. It trades about 0.26 of its potential returns per unit of risk. Sotkamo Silver AB is currently generating about 0.03 per unit of risk. If you would invest  213.00  in Finnair Oyj on December 2, 2024 and sell it today you would earn a total of  140.00  from holding Finnair Oyj or generate 65.73% return on investment over 90 days.

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

Finnair Oyj  vs.  Sotkamo Silver AB

Finnair Oyj

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Finnair Oyj are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Finnair Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Sotkamo Silver AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sotkamo Silver AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Sotkamo Silver is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Finnair Oyj and Sotkamo Silver

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

The idea behind Finnair Oyj and Sotkamo Silver AB 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.