Correlation Between Finnair Oyj and Volaris

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

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

Diversification Opportunities for Finnair Oyj and Volaris

-0.63

Correlation Coefficient

Finnair Oyj  Volaris

Excellent diversification

The 3 months correlation between Finnair and Volaris is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and Volaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volaris 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 Volaris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volaris has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and Volaris go up and down completely randomly.

Pair Corralation between Finnair Oyj and Volaris

Assuming the 90 days horizon Finnair Oyj is expected to generate 13.87 times less return on investment than Volaris. In addition to that, Finnair Oyj is 1.15 times more volatile than Volaris. It trades about 0.01 of its total potential returns per unit of risk. Volaris is currently generating about 0.19 per unit of volatility. If you would invest  637.00  in Volaris on September 21, 2024 and sell it today you would earn a total of  173.00  from holding Volaris or generate 27.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Finnair Oyj  vs.  Volaris

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.

Volaris

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volaris are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Volaris unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Finnair Oyj and Volaris

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

The idea behind Finnair Oyj and Volaris 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.