Correlation Between Biohit Oyj and Finnair Oyj

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

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

Diversification Opportunities for Biohit Oyj and Finnair Oyj

-0.46

Correlation Coefficient

Biohit Oyj  Finnair Oyj

Very good diversification

The 3 months correlation between Biohit and Finnair is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Biohit Oyj B and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj and Biohit 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 Biohit Oyj B 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 Biohit Oyj i.e., Biohit Oyj and Finnair Oyj go up and down completely randomly.

Pair Corralation between Biohit Oyj and Finnair Oyj

Assuming the 90 days trading horizon Biohit Oyj B is expected to generate 0.35 times more return on investment than Finnair Oyj. However, Biohit Oyj B is 2.87 times less risky than Finnair Oyj. It trades about -0.03 of its potential returns per unit of risk. Finnair Oyj is currently generating about -0.07 per unit of risk. If you would invest  203.00  in Biohit Oyj B on January 30, 2024 and sell it today you would lose (1.00) from holding Biohit Oyj B or give up 0.49% of portfolio value over 90 days.

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

Biohit Oyj B  vs.  Finnair Oyj

Biohit Oyj B

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biohit Oyj B are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Biohit Oyj may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Biohit Oyj and Finnair Oyj

The main advantage of trading using opposite Biohit Oyj and Finnair Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biohit Oyj 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 Biohit Oyj B 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.