Correlation Between Singapore Airlines and Finnair Oyj

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

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

Diversification Opportunities for Singapore Airlines and Finnair Oyj

0.74

Correlation Coefficient

Singapore Airlines  Finnair Oyj

Poor diversification

The 3 months correlation between Singapore and Finnair is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Airlines and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj and Singapore Airlines 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 Singapore Airlines 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 Singapore Airlines i.e., Singapore Airlines and Finnair Oyj go up and down completely randomly.

Pair Corralation between Singapore Airlines and Finnair Oyj

Assuming the 90 days horizon Singapore Airlines is expected to generate 6.78 times less return on investment than Finnair Oyj. But when comparing it to its historical volatility, Singapore Airlines is 1.06 times less risky than Finnair Oyj. It trades about 0.04 of its potential returns per unit of risk. Finnair Oyj is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  235.00  in Finnair Oyj on December 30, 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	Significant
Accuracy	90.48%
Values	Daily Returns

Singapore Airlines  vs.  Finnair Oyj

Singapore Airlines

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Airlines are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Singapore Airlines may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Singapore Airlines and Finnair Oyj

The main advantage of trading using opposite Singapore Airlines and Finnair Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore Airlines 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 Singapore Airlines 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.