Correlation Between Air Canada and Talon Metals
Can any of the company-specific risk be diversified away by investing in both Air Canada and Talon 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 Talon 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 Talon Metals Corp, you can compare the effects of market volatilities on Air Canada and Talon 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 Talon Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Talon Metals.
Diversification Opportunities for Air Canada and Talon Metals
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Air and Talon is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Talon Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talon Metals Corp 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 Talon Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talon Metals Corp has no effect on the direction of Air Canada i.e., Air Canada and Talon Metals go up and down completely randomly.
Pair Corralation between Air Canada and Talon Metals
Assuming the 90 days horizon Air Canada is expected to generate 0.45 times more return on investment than Talon Metals. However, Air Canada is 2.2 times less risky than Talon Metals. It trades about 0.04 of its potential returns per unit of risk. Talon Metals Corp is currently generating about -0.06 per unit of risk. If you would invest 1,897 in Air Canada on September 3, 2024 and sell it today you would earn a total of 599.00 from holding Air Canada or generate 31.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Canada vs. Talon Metals Corp
Performance |
| Timeline |
| Air Canada |
| Talon Metals Corp |
Air Canada and Talon Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and Talon Metals
The main advantage of trading using opposite Air Canada and Talon Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Talon 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 Talon Metals will offset losses from the drop in Talon Metals' long position.The idea behind Air Canada and Talon Metals Corp 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.| Talon Metals vs. Algoma Steel Group | Talon Metals vs. Champion Iron | Talon Metals vs. International Zeolite Corp | Talon Metals vs. European Residential Real |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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