Correlation Between Finnair Oyj and Allient

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

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

Diversification Opportunities for Finnair Oyj and Allient

-0.85

Correlation Coefficient

Finnair Oyj  Allient

Pay attention - limited upside

The 3 months correlation between Finnair and Allient is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and Allient in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allient 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 Allient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allient has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and Allient go up and down completely randomly.

Pair Corralation between Finnair Oyj and Allient

Assuming the 90 days horizon Finnair Oyj is expected to under-perform the Allient. But the pink sheet apears to be less risky and, when comparing its historical volatility, Finnair Oyj is 2.01 times less risky than Allient. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Allient is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,445  in Allient on September 15, 2024 and sell it today you would earn a total of  137.00  from holding Allient or generate 5.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Finnair Oyj  vs.  Allient

Finnair Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Finnair Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Allient

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allient are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Allient unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Finnair Oyj and Allient

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

The idea behind Finnair Oyj and Allient 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.