Correlation Between Worldwide Healthcare and Finnair Oyj

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

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

Diversification Opportunities for Worldwide Healthcare and Finnair Oyj

0.34

Correlation Coefficient

Worldwide Healthcare  Finnair Oyj

Weak diversification

The 3 months correlation between Worldwide and Finnair is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Worldwide Healthcare Trust and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj and Worldwide Healthcare 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 Worldwide Healthcare Trust 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 Worldwide Healthcare i.e., Worldwide Healthcare and Finnair Oyj go up and down completely randomly.

Pair Corralation between Worldwide Healthcare and Finnair Oyj

Assuming the 90 days trading horizon Worldwide Healthcare Trust is expected to under-perform the Finnair Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Worldwide Healthcare Trust is 3.7 times less risky than Finnair Oyj. The stock trades about -0.01 of its potential returns per unit of risk. The Finnair Oyj is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  215.00  in Finnair Oyj on November 29, 2024 and sell it today you would earn a total of  152.00  from holding Finnair Oyj or generate 70.7% return on investment over 90 days.

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

Worldwide Healthcare Trust  vs.  Finnair Oyj

Worldwide Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Worldwide Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Worldwide Healthcare is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. In spite of comparatively unsteady basic indicators, Finnair Oyj unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Worldwide Healthcare and Finnair Oyj

The main advantage of trading using opposite Worldwide Healthcare and Finnair Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Worldwide Healthcare 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 Worldwide Healthcare Trust 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.