Correlation Between Finnair Oyj and New Horizon

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

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

Diversification Opportunities for Finnair Oyj and New Horizon

-0.43

Correlation Coefficient

Finnair Oyj  New Horizon

Very good diversification

The 3 months correlation between Finnair and New is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and New Horizon Aircraft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Horizon Aircraft 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 New Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Horizon Aircraft has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and New Horizon go up and down completely randomly.

Pair Corralation between Finnair Oyj and New Horizon

Assuming the 90 days horizon Finnair Oyj is expected to generate 1.96 times more return on investment than New Horizon. However, Finnair Oyj is 1.96 times more volatile than New Horizon Aircraft. It trades about 0.03 of its potential returns per unit of risk. New Horizon Aircraft is currently generating about -0.01 per unit of risk. If you would invest  742.00  in Finnair Oyj on October 10, 2024 and sell it today you would lose (507.00) from holding Finnair Oyj or give up 68.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.34%
Values	Daily Returns

Finnair Oyj  vs.  New Horizon Aircraft

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.

New Horizon Aircraft

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Horizon Aircraft are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, New Horizon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Finnair Oyj and New Horizon

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

The idea behind Finnair Oyj and New Horizon Aircraft 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.