Correlation Between Pentair PLC and Finnair Oyj

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

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

Diversification Opportunities for Pentair PLC and Finnair Oyj

-0.74

Correlation Coefficient

Pentair PLC  Finnair Oyj

Pay attention - limited upside

The 3 months correlation between Pentair and Finnair is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj and Pentair PLC 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 Pentair PLC are associated (or correlated) with Finnair Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finnair Oyj has no effect on the direction of Pentair PLC i.e., Pentair PLC and Finnair Oyj go up and down completely randomly.

Pair Corralation between Pentair PLC and Finnair Oyj

Considering the 90-day investment horizon Pentair PLC is expected to under-perform the Finnair Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Pentair PLC is 2.15 times less risky than Finnair Oyj. The stock trades about -0.15 of its potential returns per unit of risk. The Finnair Oyj is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  229.00  in Finnair Oyj on September 22, 2024 and sell it today you would earn a total of  21.00  from holding Finnair Oyj or generate 9.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Pentair PLC  vs.  Finnair Oyj

Pentair PLC

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Pentair PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Pentair PLC and Finnair Oyj

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

The idea behind Pentair PLC and Finnair Oyj 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.