Correlation Between Air Canada and Ramp Metals
Can any of the company-specific risk be diversified away by investing in both Air Canada and Ramp Metals 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 Ramp Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Ramp Metals, you can compare the effects of market volatilities on Air Canada and Ramp Metals 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 Ramp Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Ramp Metals.
Diversification Opportunities for Air Canada and Ramp Metals
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Ramp is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Ramp Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramp Metals 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 Ramp Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramp Metals has no effect on the direction of Air Canada i.e., Air Canada and Ramp Metals go up and down completely randomly.
Pair Corralation between Air Canada and Ramp Metals
Assuming the 90 days horizon Air Canada is expected to generate 29.82 times less return on investment than Ramp Metals. But when comparing it to its historical volatility, Air Canada is 9.98 times less risky than Ramp Metals. It trades about 0.03 of its potential returns per unit of risk. Ramp Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 19.00 in Ramp Metals on September 12, 2024 and sell it today you would earn a total of 57.00 from holding Ramp Metals or generate 300.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 55.15% |
| Values | Daily Returns |
Air Canada vs. Ramp Metals
Performance |
| Timeline |
| Air Canada |
| Ramp Metals |
Air Canada and Ramp Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and Ramp Metals
The main advantage of trading using opposite Air Canada and Ramp Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Ramp Metals 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 Ramp Metals will offset losses from the drop in Ramp Metals' long position.The idea behind Air Canada and Ramp Metals 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.| Ramp Metals vs. Constellation Software | Ramp Metals vs. Metalero Mining Corp | Ramp Metals vs. Cogeco Communications | Ramp Metals vs. Costco Wholesale Corp |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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