Correlation Between Air Canada and CVW CleanTech
Can any of the company-specific risk be diversified away by investing in both Air Canada and CVW CleanTech 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 CVW CleanTech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and CVW CleanTech, you can compare the effects of market volatilities on Air Canada and CVW CleanTech 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 CVW CleanTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and CVW CleanTech.
Diversification Opportunities for Air Canada and CVW CleanTech
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and CVW is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech 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 CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of Air Canada i.e., Air Canada and CVW CleanTech go up and down completely randomly.
Pair Corralation between Air Canada and CVW CleanTech
Assuming the 90 days horizon Air Canada is expected to under-perform the CVW CleanTech. In addition to that, Air Canada is 1.07 times more volatile than CVW CleanTech. It trades about -0.39 of its total potential returns per unit of risk. CVW CleanTech is currently generating about -0.08 per unit of volatility. If you would invest 84.00 in CVW CleanTech on November 27, 2024 and sell it today you would lose (3.00) from holding CVW CleanTech or give up 3.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Canada vs. CVW CleanTech
Performance |
| Timeline |
| Air Canada |
| CVW CleanTech |
Air Canada and CVW CleanTech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and CVW CleanTech
The main advantage of trading using opposite Air Canada and CVW CleanTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, CVW CleanTech 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 CVW CleanTech will offset losses from the drop in CVW CleanTech's long position.The idea behind Air Canada and CVW CleanTech 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.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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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