Correlation Between Finnair Oyj and SUMITOMO

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

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

Diversification Opportunities for Finnair Oyj and SUMITOMO

0.4

Correlation Coefficient

Finnair Oyj  SUMITOMO

Very weak diversification

The 3 months correlation between Finnair and SUMITOMO is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and SUMITOMO MITSUI FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUMITOMO MITSUI FINANCIAL and Finnair Oyj 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 Finnair Oyj are associated (or correlated) with SUMITOMO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUMITOMO MITSUI FINANCIAL has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and SUMITOMO go up and down completely randomly.

Pair Corralation between Finnair Oyj and SUMITOMO

Assuming the 90 days horizon Finnair Oyj is expected to generate 1.73 times more return on investment than SUMITOMO. However, Finnair Oyj is 1.73 times more volatile than SUMITOMO MITSUI FINANCIAL. It trades about -0.07 of its potential returns per unit of risk. SUMITOMO MITSUI FINANCIAL is currently generating about -0.16 per unit of risk. If you would invest  250.00  in Finnair Oyj on September 12, 2024 and sell it today you would lose (25.00) from holding Finnair Oyj or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.25%
Values	Daily Returns

Finnair Oyj  vs.  SUMITOMO MITSUI FINANCIAL

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SUMITOMO MITSUI FINANCIAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SUMITOMO MITSUI FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for SUMITOMO MITSUI FINANCIAL investors.

Pair Trading with Finnair Oyj and SUMITOMO

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

The idea behind Finnair Oyj and SUMITOMO MITSUI FINANCIAL 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.