Correlation Between Naked Wines and Finnair Oyj

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

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

Diversification Opportunities for Naked Wines and Finnair Oyj

0.43

Correlation Coefficient

Naked Wines  Finnair Oyj

Very weak diversification

The 3 months correlation between Naked and Finnair is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj and Naked Wines 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 Naked Wines 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 Naked Wines i.e., Naked Wines and Finnair Oyj go up and down completely randomly.

Pair Corralation between Naked Wines and Finnair Oyj

Assuming the 90 days trading horizon Naked Wines is expected to generate 1.29 times less return on investment than Finnair Oyj. In addition to that, Naked Wines is 1.2 times more volatile than Finnair Oyj. It trades about 0.02 of its total potential returns per unit of risk. Finnair Oyj is currently generating about 0.03 per unit of volatility. If you would invest  232.00  in Finnair Oyj on September 13, 2024 and sell it today you would earn a total of  5.00  from holding Finnair Oyj or generate 2.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Naked Wines plc  vs.  Finnair Oyj

Naked Wines plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Naked Wines is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Finnair Oyj

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Finnair Oyj are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Finnair Oyj is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Naked Wines and Finnair Oyj

The main advantage of trading using opposite Naked Wines and Finnair Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines 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 Naked Wines 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.