Correlation Between Finnair Oyj and Global Engine

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

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

Diversification Opportunities for Finnair Oyj and Global Engine

-0.12

Correlation Coefficient

Finnair Oyj  Global Engine

Good diversification

The 3 months correlation between Finnair and Global is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and Global Engine Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Engine Group 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 Global Engine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Engine Group has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and Global Engine go up and down completely randomly.

Pair Corralation between Finnair Oyj and Global Engine

Assuming the 90 days horizon Finnair Oyj is expected to generate 0.4 times more return on investment than Global Engine. However, Finnair Oyj is 2.47 times less risky than Global Engine. It trades about 0.22 of its potential returns per unit of risk. Global Engine Group is currently generating about 0.05 per unit of risk. If you would invest  250.00  in Finnair Oyj on December 20, 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 Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Finnair Oyj  vs.  Global Engine Group

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.

Global Engine Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Engine Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Global Engine exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Finnair Oyj and Global Engine

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

The idea behind Finnair Oyj and Global Engine Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.