Correlation Between Air Canada and Carmat SA
Can any of the company-specific risk be diversified away by investing in both Air Canada and Carmat SA 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 Carmat SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Carmat SA, you can compare the effects of market volatilities on Air Canada and Carmat SA 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 Carmat SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Carmat SA.
Diversification Opportunities for Air Canada and Carmat SA
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Air and Carmat is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Carmat SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carmat SA 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 Carmat SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carmat SA has no effect on the direction of Air Canada i.e., Air Canada and Carmat SA go up and down completely randomly.
Pair Corralation between Air Canada and Carmat SA
Assuming the 90 days trading horizon Air Canada is expected to generate 0.44 times more return on investment than Carmat SA. However, Air Canada is 2.28 times less risky than Carmat SA. It trades about 0.37 of its potential returns per unit of risk. Carmat SA is currently generating about -0.19 per unit of risk. If you would invest 1,428 in Air Canada on September 3, 2024 and sell it today you would earn a total of 247.00 from holding Air Canada or generate 17.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Canada vs. Carmat SA
Performance |
| Timeline |
| Air Canada |
| Carmat SA |
Air Canada and Carmat SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and Carmat SA
The main advantage of trading using opposite Air Canada and Carmat SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Carmat SA 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 Carmat SA will offset losses from the drop in Carmat SA's long position.The idea behind Air Canada and Carmat SA 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.| Carmat SA vs. USWE SPORTS AB | Carmat SA vs. PUBLIC STORAGE PRFO | Carmat SA vs. Playa Hotels Resorts | Carmat SA vs. National Storage Affiliates |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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