Correlation Between Finnair Oyj and Ares AcquisitionII

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

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

Diversification Opportunities for Finnair Oyj and Ares AcquisitionII

0.4

Correlation Coefficient

Finnair Oyj  Ares AcquisitionII

Very weak diversification

The 3 months correlation between Finnair and Ares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and Ares Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares AcquisitionII 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 Ares AcquisitionII. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares AcquisitionII has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and Ares AcquisitionII go up and down completely randomly.

Pair Corralation between Finnair Oyj and Ares AcquisitionII

Assuming the 90 days horizon Finnair Oyj is expected to generate 3.96 times more return on investment than Ares AcquisitionII. However, Finnair Oyj is 3.96 times more volatile than Ares Acquisition. It trades about 0.22 of its potential returns per unit of risk. Ares Acquisition is currently generating about 0.08 per unit of risk. If you would invest  250.00  in Finnair Oyj on December 21, 2024 and sell it today you would earn a total of  140.00  from holding Finnair Oyj or generate 56.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.65%
Values	Daily Returns

Finnair Oyj  vs.  Ares Acquisition

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. Despite nearly fragile basic indicators, Finnair Oyj reported solid returns over the last few months and may actually be approaching a breakup point.

Ares AcquisitionII

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Acquisition are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Ares AcquisitionII is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Finnair Oyj and Ares AcquisitionII

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

The idea behind Finnair Oyj and Ares Acquisition 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.