Correlation Between International Consolidated and Finnair Oyj

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

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

Diversification Opportunities for International Consolidated and Finnair Oyj

-0.35

Correlation Coefficient

International Consolidated  Finnair Oyj

Very good diversification

The 3 months correlation between International and Finnair is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj and International Consolidated 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 International Consolidated 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 International Consolidated i.e., International Consolidated and Finnair Oyj go up and down completely randomly.

Pair Corralation between International Consolidated and Finnair Oyj

Assuming the 90 days horizon International Consolidated is expected to generate 23.21 times less return on investment than Finnair Oyj. But when comparing it to its historical volatility, International Consolidated Airlines is 15.84 times less risky than Finnair Oyj. It trades about 0.06 of its potential returns per unit of risk. Finnair Oyj is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  400.00  in Finnair Oyj on March 4, 2024 and sell it today you would lose (90.00) from holding Finnair Oyj or give up 22.5% of portfolio value over 90 days.

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

International Consolidated Air  vs.  Finnair Oyj

International Consolidated

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, International Consolidated may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Finnair Oyj

Risk-Adjusted Performance

6 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Finnair Oyj are ranked lower than 6 (%) 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 International Consolidated and Finnair Oyj

The main advantage of trading using opposite International Consolidated and Finnair Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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 International Consolidated 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.