Correlation Between Finnair Oyj and DR Horton

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

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

Diversification Opportunities for Finnair Oyj and DR Horton

0.33

Correlation Coefficient

Finnair Oyj  DR Horton

Weak diversification

The 3 months correlation between Finnair and DHI is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and DR Horton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Horton 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 DR Horton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Horton has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and DR Horton go up and down completely randomly.

Pair Corralation between Finnair Oyj and DR Horton

Assuming the 90 days horizon Finnair Oyj is expected to generate 1.19 times more return on investment than DR Horton. However, Finnair Oyj is 1.19 times more volatile than DR Horton. It trades about -0.02 of its potential returns per unit of risk. DR Horton is currently generating about -0.17 per unit of risk. If you would invest  250.00  in Finnair Oyj on October 3, 2024 and sell it today you would lose (15.00) from holding Finnair Oyj or give up 6.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

Finnair Oyj  vs.  DR Horton

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 nearly stable basic indicators, Finnair Oyj is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

DR Horton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DR Horton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Finnair Oyj and DR Horton

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

The idea behind Finnair Oyj and DR Horton 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.