Correlation Between Finnair Oyj and 713448FG8

Can any of the company-specific risk be diversified away by investing in both Finnair Oyj and 713448FG8 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 713448FG8 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Finnair Oyj and PEP 275 21 OCT 51, you can compare the effects of market volatilities on Finnair Oyj and 713448FG8 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 713448FG8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finnair Oyj and 713448FG8.

Diversification Opportunities for Finnair Oyj and 713448FG8

0.09

Correlation Coefficient

Finnair Oyj  713448FG8

Significant diversification

The 3 months correlation between Finnair and 713448FG8 is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and PEP 275 21 OCT 51 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEP 275 21 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 713448FG8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEP 275 21 has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and 713448FG8 go up and down completely randomly.

Pair Corralation between Finnair Oyj and 713448FG8

Assuming the 90 days horizon Finnair Oyj is expected to generate 10.52 times more return on investment than 713448FG8. However, Finnair Oyj is 10.52 times more volatile than PEP 275 21 OCT 51. It trades about 0.04 of its potential returns per unit of risk. PEP 275 21 OCT 51 is currently generating about 0.02 per unit of risk. If you would invest  550.00  in Finnair Oyj on September 27, 2024 and sell it today you would lose (300.00) from holding Finnair Oyj or give up 54.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	89.22%
Values	Daily Returns

Finnair Oyj  vs.  PEP 275 21 OCT 51

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.

PEP 275 21

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days PEP 275 21 OCT 51 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 713448FG8 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Finnair Oyj and 713448FG8

The main advantage of trading using opposite Finnair Oyj and 713448FG8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finnair Oyj position performs unexpectedly, 713448FG8 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 713448FG8 will offset losses from the drop in 713448FG8's long position.

The idea behind Finnair Oyj and PEP 275 21 OCT 51 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.