Correlation Between Air Canada and American Hotel
Can any of the company-specific risk be diversified away by investing in both Air Canada and American Hotel 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 American Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and American Hotel Income, you can compare the effects of market volatilities on Air Canada and American Hotel 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 American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and American Hotel.
Diversification Opportunities for Air Canada and American Hotel
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Air and American is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income 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 American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of Air Canada i.e., Air Canada and American Hotel go up and down completely randomly.
Pair Corralation between Air Canada and American Hotel
Assuming the 90 days horizon Air Canada is expected to generate 0.36 times more return on investment than American Hotel. However, Air Canada is 2.76 times less risky than American Hotel. It trades about 0.03 of its potential returns per unit of risk. American Hotel Income is currently generating about -0.07 per unit of risk. If you would invest 2,232 in Air Canada on August 31, 2024 and sell it today you would earn a total of 264.00 from holding Air Canada or generate 11.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.35% |
| Values | Daily Returns |
Air Canada vs. American Hotel Income
Performance |
| Timeline |
| Air Canada |
| American Hotel Income |
Air Canada and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and American Hotel
The main advantage of trading using opposite Air Canada and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, American Hotel 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 American Hotel will offset losses from the drop in American Hotel's long position.The idea behind Air Canada and American Hotel Income 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.| American Hotel vs. Sprott Physical Gold | American Hotel vs. Canso Select Opportunities | American Hotel vs. Green Panda Capital | American Hotel vs. Manulife Finl Srs |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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