Correlation Between Japan Airlines and Finnair Oyj
Can any of the company-specific risk be diversified away by investing in both Japan Airlines 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 Japan Airlines and Finnair Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Airlines Ltd and Finnair Oyj, you can compare the effects of market volatilities on Japan Airlines 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 Japan Airlines with a short position of Finnair Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Airlines and Finnair Oyj.
Diversification Opportunities for Japan Airlines and Finnair Oyj
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Japan and Finnair is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Japan Airlines Ltd and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj and Japan Airlines 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 Japan Airlines Ltd 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 Japan Airlines i.e., Japan Airlines and Finnair Oyj go up and down completely randomly.
Pair Corralation between Japan Airlines and Finnair Oyj
Assuming the 90 days horizon Japan Airlines is expected to generate 3.0 times less return on investment than Finnair Oyj. But when comparing it to its historical volatility, Japan Airlines Ltd is 14.14 times less risky than Finnair Oyj. It trades about 0.12 of its potential returns per unit of risk. Finnair Oyj is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 826.00 in Finnair Oyj on August 29, 2024 and sell it today you would lose (593.00) from holding Finnair Oyj or give up 71.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 13.49% |
| Values | Daily Returns |
Japan Airlines Ltd vs. Finnair Oyj
Performance |
| Timeline |
| Japan Airlines |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Finnair Oyj |
Japan Airlines and Finnair Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Airlines and Finnair Oyj
The main advantage of trading using opposite Japan Airlines and Finnair Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Airlines 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.| Japan Airlines vs. Qantas Airways Limited | Japan Airlines vs. Cathay Pacific Airways | Japan Airlines vs. Singapore Airlines | Japan Airlines vs. Singapore Airlines |
| Finnair Oyj vs. easyJet plc | Finnair Oyj vs. Norse Atlantic ASA | Finnair Oyj vs. Air New Zealand | Finnair Oyj vs. Air China Limited |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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