Correlation Between Finnair Oyj and Indivior PLC

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Can any of the company-specific risk be diversified away by investing in both Finnair Oyj and Indivior PLC 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 Indivior PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Finnair Oyj and Indivior PLC, you can compare the effects of market volatilities on Finnair Oyj and Indivior PLC 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 Indivior PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finnair Oyj and Indivior PLC.

Diversification Opportunities for Finnair Oyj and Indivior PLC

-0.58
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Finnair and Indivior is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Finnair Oyj and Indivior PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indivior PLC 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 Indivior PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indivior PLC has no effect on the direction of Finnair Oyj i.e., Finnair Oyj and Indivior PLC go up and down completely randomly.

Pair Corralation between Finnair Oyj and Indivior PLC

Assuming the 90 days trading horizon Finnair Oyj is expected to under-perform the Indivior PLC. But the stock apears to be less risky and, when comparing its historical volatility, Finnair Oyj is 1.32 times less risky than Indivior PLC. The stock trades about -0.07 of its potential returns per unit of risk. The Indivior PLC is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  135,000  in Indivior PLC on September 14, 2024 and sell it today you would lose (42,900) from holding Indivior PLC or give up 31.78% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy99.63%
ValuesDaily Returns

Finnair Oyj  vs.  Indivior PLC

 Performance 
       Timeline  
Finnair Oyj 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
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.
Indivior PLC 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Indivior PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indivior PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Finnair Oyj and Indivior PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Finnair Oyj and Indivior PLC

The main advantage of trading using opposite Finnair Oyj and Indivior PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finnair Oyj position performs unexpectedly, Indivior PLC 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 Indivior PLC will offset losses from the drop in Indivior PLC's long position.
The idea behind Finnair Oyj and Indivior PLC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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