Correlation Between Finnair Oyj and ESH Acquisition

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

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

Diversification Opportunities for Finnair Oyj and ESH Acquisition

-0.09

Correlation Coefficient

Finnair Oyj  ESH Acquisition

Good diversification

The 3 months correlation between Finnair and ESH is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and ESH Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESH Acquisition Corp 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 ESH Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESH Acquisition Corp has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and ESH Acquisition go up and down completely randomly.

Pair Corralation between Finnair Oyj and ESH Acquisition

Assuming the 90 days horizon Finnair Oyj is expected to under-perform the ESH Acquisition. In addition to that, Finnair Oyj is 1.48 times more volatile than ESH Acquisition Corp. It trades about -0.03 of its total potential returns per unit of risk. ESH Acquisition Corp is currently generating about 0.02 per unit of volatility. If you would invest  1,066  in ESH Acquisition Corp on October 24, 2024 and sell it today you would earn a total of  11.00  from holding ESH Acquisition Corp or generate 1.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Finnair Oyj  vs.  ESH Acquisition Corp

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.

ESH Acquisition Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, ESH Acquisition is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Finnair Oyj and ESH Acquisition

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

The idea behind Finnair Oyj and ESH Acquisition Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.