Correlation Between Finnair Oyj and Cebu Air

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

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

Diversification Opportunities for Finnair Oyj and Cebu Air

0.0

Correlation Coefficient

Finnair Oyj  Cebu Air

Pay attention - limited upside

The 3 months correlation between Finnair and Cebu is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and Cebu Air ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air ADR 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 Cebu Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cebu Air ADR has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and Cebu Air go up and down completely randomly.

Pair Corralation between Finnair Oyj and Cebu Air

If you would invest  235.00  in Finnair Oyj on December 29, 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	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Finnair Oyj  vs.  Cebu Air ADR

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.

Cebu Air ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cebu Air ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Cebu Air is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Finnair Oyj and Cebu Air

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

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