Correlation Between Finnair Oyj and Meliá Hotels

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

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

Diversification Opportunities for Finnair Oyj and Meliá Hotels

-0.01

Correlation Coefficient

Finnair Oyj  Meliá Hotels

Good diversification

The 3 months correlation between Finnair and Meliá is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and Meli Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meli Hotels International 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 Meliá Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meli Hotels International has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and Meliá Hotels go up and down completely randomly.

Pair Corralation between Finnair Oyj and Meliá Hotels

Assuming the 90 days horizon Finnair Oyj is expected to generate 0.43 times more return on investment than Meliá Hotels. However, Finnair Oyj is 2.33 times less risky than Meliá Hotels. It trades about -0.21 of its potential returns per unit of risk. Meli Hotels International is currently generating about -0.23 per unit of risk. If you would invest  250.00  in Finnair Oyj on October 24, 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 Against
Strength	Insignificant
Accuracy	86.36%
Values	Daily Returns

Finnair Oyj  vs.  Meli Hotels International

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.

Meli Hotels International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meli Hotels International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Meliá Hotels is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Finnair Oyj and Meliá Hotels

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

The idea behind Finnair Oyj and Meli Hotels International 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 Stocks Directory module to find actively traded stocks across global markets.