Correlation Between Air Canada and Canaf Investments
Can any of the company-specific risk be diversified away by investing in both Air Canada and Canaf Investments 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 Air Canada and Canaf Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Canaf Investments, you can compare the effects of market volatilities on Air Canada and Canaf Investments 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 Air Canada with a short position of Canaf Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Canaf Investments.
Diversification Opportunities for Air Canada and Canaf Investments
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Air and Canaf is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Canaf Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaf Investments and Air Canada 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 Air Canada are associated (or correlated) with Canaf Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canaf Investments has no effect on the direction of Air Canada i.e., Air Canada and Canaf Investments go up and down completely randomly.
Pair Corralation between Air Canada and Canaf Investments
Assuming the 90 days horizon Air Canada is expected to under-perform the Canaf Investments. But the stock apears to be less risky and, when comparing its historical volatility, Air Canada is 2.6 times less risky than Canaf Investments. The stock trades about -0.46 of its potential returns per unit of risk. The Canaf Investments is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 31.00 in Canaf Investments on November 3, 2024 and sell it today you would earn a total of 8.00 from holding Canaf Investments or generate 25.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Canada vs. Canaf Investments
Performance |
| Timeline |
| Air Canada |
| Canaf Investments |
Air Canada and Canaf Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and Canaf Investments
The main advantage of trading using opposite Air Canada and Canaf Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Canaf Investments 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 Canaf Investments will offset losses from the drop in Canaf Investments' long position.The idea behind Air Canada and Canaf Investments 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.| Canaf Investments vs. First Majestic Silver | Canaf Investments vs. Ivanhoe Energy | Canaf Investments vs. Flinders Resources Limited | Canaf Investments vs. Orezone Gold Corp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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