Correlation Between Finnair Oyj and KNOT Offshore

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

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

Diversification Opportunities for Finnair Oyj and KNOT Offshore

0.13

Correlation Coefficient

Finnair Oyj  KNOT Offshore

Average diversification

The 3 months correlation between Finnair and KNOT is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and KNOT Offshore Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNOT Offshore Partners 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 KNOT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNOT Offshore Partners has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and KNOT Offshore go up and down completely randomly.

Pair Corralation between Finnair Oyj and KNOT Offshore

Assuming the 90 days horizon Finnair Oyj is expected to generate 1.23 times more return on investment than KNOT Offshore. However, Finnair Oyj is 1.23 times more volatile than KNOT Offshore Partners. It trades about 0.27 of its potential returns per unit of risk. KNOT Offshore Partners is currently generating about 0.14 per unit of risk. If you would invest  235.00  in Finnair Oyj on December 28, 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	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Finnair Oyj  vs.  KNOT Offshore Partners

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.

KNOT Offshore Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KNOT Offshore Partners are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, KNOT Offshore reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Finnair Oyj and KNOT Offshore

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

The idea behind Finnair Oyj and KNOT Offshore Partners 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.