Correlation Between Gamma Communications and Finnair Oyj

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

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

Diversification Opportunities for Gamma Communications and Finnair Oyj

0.44

Correlation Coefficient

Gamma Communications  Finnair Oyj

Very weak diversification

The 3 months correlation between Gamma and Finnair is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications PLC and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj and Gamma Communications 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 Gamma Communications 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 Gamma Communications i.e., Gamma Communications and Finnair Oyj go up and down completely randomly.

Pair Corralation between Gamma Communications and Finnair Oyj

Assuming the 90 days trading horizon Gamma Communications PLC is expected to generate 0.39 times more return on investment than Finnair Oyj. However, Gamma Communications PLC is 2.54 times less risky than Finnair Oyj. It trades about 0.07 of its potential returns per unit of risk. Finnair Oyj is currently generating about -0.04 per unit of risk. If you would invest  103,932  in Gamma Communications PLC on September 14, 2024 and sell it today you would earn a total of  57,868  from holding Gamma Communications PLC or generate 55.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Gamma Communications PLC  vs.  Finnair Oyj

Gamma Communications PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamma Communications PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Gamma Communications 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

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Finnair Oyj are ranked lower than 1 (%) 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 Gamma Communications and Finnair Oyj

The main advantage of trading using opposite Gamma Communications and Finnair Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications 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 Gamma Communications 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.