Correlation Between Air Canada and South Pacific
Can any of the company-specific risk be diversified away by investing in both Air Canada and South Pacific 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 South Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and South Pacific Metals, you can compare the effects of market volatilities on Air Canada and South Pacific 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 South Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and South Pacific.
Diversification Opportunities for Air Canada and South Pacific
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Air and South is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and South Pacific Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Pacific 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 South Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Pacific Metals has no effect on the direction of Air Canada i.e., Air Canada and South Pacific go up and down completely randomly.
Pair Corralation between Air Canada and South Pacific
Assuming the 90 days horizon Air Canada is expected to generate 19.29 times less return on investment than South Pacific. But when comparing it to its historical volatility, Air Canada is 5.01 times less risky than South Pacific. It trades about 0.01 of its potential returns per unit of risk. South Pacific Metals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 80.00 in South Pacific Metals on October 13, 2024 and sell it today you would lose (30.00) from holding South Pacific Metals or give up 37.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Canada vs. South Pacific Metals
Performance |
| Timeline |
| Air Canada |
| South Pacific Metals |
Air Canada and South Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and South Pacific
The main advantage of trading using opposite Air Canada and South Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, South Pacific 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 South Pacific will offset losses from the drop in South Pacific's long position.The idea behind Air Canada and South Pacific 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.| South Pacific vs. CVW CleanTech | South Pacific vs. 2028 Investment Grade | South Pacific vs. Jamieson Wellness | South Pacific vs. Air Canada |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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