Correlation Between Air Canada and Chorus Aviation
Can any of the company-specific risk be diversified away by investing in both Air Canada and Chorus Aviation 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 Chorus Aviation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Chorus Aviation, you can compare the effects of market volatilities on Air Canada and Chorus Aviation 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 Chorus Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Chorus Aviation.
Diversification Opportunities for Air Canada and Chorus Aviation
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Air and Chorus is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Chorus Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chorus Aviation 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 Chorus Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chorus Aviation has no effect on the direction of Air Canada i.e., Air Canada and Chorus Aviation go up and down completely randomly.
Pair Corralation between Air Canada and Chorus Aviation
Assuming the 90 days horizon Air Canada is expected to generate 0.87 times more return on investment than Chorus Aviation. However, Air Canada is 1.15 times less risky than Chorus Aviation. It trades about 0.04 of its potential returns per unit of risk. Chorus Aviation is currently generating about 0.02 per unit of risk. If you would invest 1,889 in Air Canada on August 29, 2024 and sell it today you would earn a total of 574.00 from holding Air Canada or generate 30.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Canada vs. Chorus Aviation
Performance |
| Timeline |
| Air Canada |
| Chorus Aviation |
Air Canada and Chorus Aviation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and Chorus Aviation
The main advantage of trading using opposite Air Canada and Chorus Aviation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Chorus Aviation 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 Chorus Aviation will offset losses from the drop in Chorus Aviation's long position.The idea behind Air Canada and Chorus Aviation 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.| Chorus Aviation vs. Cargojet | Chorus Aviation vs. Exchange Income | Chorus Aviation vs. Cineplex | Chorus Aviation vs. Transat AT |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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