Correlation Between Air Canada and Extendicare
Can any of the company-specific risk be diversified away by investing in both Air Canada and Extendicare 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 Extendicare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Extendicare, you can compare the effects of market volatilities on Air Canada and Extendicare 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 Extendicare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Extendicare.
Diversification Opportunities for Air Canada and Extendicare
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Air and Extendicare is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Extendicare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extendicare 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 Extendicare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extendicare has no effect on the direction of Air Canada i.e., Air Canada and Extendicare go up and down completely randomly.
Pair Corralation between Air Canada and Extendicare
Assuming the 90 days horizon Air Canada is expected to under-perform the Extendicare. But the stock apears to be less risky and, when comparing its historical volatility, Air Canada is 1.12 times less risky than Extendicare. The stock trades about 0.0 of its potential returns per unit of risk. The Extendicare is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 241.00 in Extendicare on November 2, 2024 and sell it today you would earn a total of 802.00 from holding Extendicare or generate 332.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Canada vs. Extendicare
Performance |
| Timeline |
| Air Canada |
| Extendicare |
Air Canada and Extendicare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and Extendicare
The main advantage of trading using opposite Air Canada and Extendicare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Extendicare 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 Extendicare will offset losses from the drop in Extendicare's long position.The idea behind Air Canada and Extendicare 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.| Extendicare vs. Sienna Senior Living | Extendicare vs. Chartwell Retirement Residences | Extendicare vs. Chemtrade Logistics Income | Extendicare vs. NorthWest Healthcare Properties |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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