Correlation Between Air Canada and Economic Investment
Can any of the company-specific risk be diversified away by investing in both Air Canada and Economic Investment 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 Economic Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Economic Investment Trust, you can compare the effects of market volatilities on Air Canada and Economic Investment 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 Economic Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Economic Investment.
Diversification Opportunities for Air Canada and Economic Investment
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Air and Economic is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Economic Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Economic Investment Trust 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 Economic Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Economic Investment Trust has no effect on the direction of Air Canada i.e., Air Canada and Economic Investment go up and down completely randomly.
Pair Corralation between Air Canada and Economic Investment
Assuming the 90 days horizon Air Canada is expected to generate 5.52 times more return on investment than Economic Investment. However, Air Canada is 5.52 times more volatile than Economic Investment Trust. It trades about 0.36 of its potential returns per unit of risk. Economic Investment Trust is currently generating about 0.4 per unit of risk. If you would invest 1,918 in Air Canada on August 31, 2024 and sell it today you would earn a total of 564.00 from holding Air Canada or generate 29.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Canada vs. Economic Investment Trust
Performance |
| Timeline |
| Air Canada |
| Economic Investment Trust |
Air Canada and Economic Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and Economic Investment
The main advantage of trading using opposite Air Canada and Economic Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Economic Investment 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 Economic Investment will offset losses from the drop in Economic Investment's long position.The idea behind Air Canada and Economic Investment Trust 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.| Economic Investment vs. Forum Energy Metals | Economic Investment vs. iShares Canadian HYBrid | Economic Investment vs. Brompton European Dividend | Economic Investment vs. Solar Alliance Energy |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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