Correlation Between Air Canada and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Air Canada and Meta Platforms 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 Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Meta Platforms, you can compare the effects of market volatilities on Air Canada and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Meta Platforms.
Diversification Opportunities for Air Canada and Meta Platforms
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Meta is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Air Canada i.e., Air Canada and Meta Platforms go up and down completely randomly.
Pair Corralation between Air Canada and Meta Platforms
Assuming the 90 days trading horizon Air Canada is expected to generate 1.99 times more return on investment than Meta Platforms. However, Air Canada is 1.99 times more volatile than Meta Platforms. It trades about 0.34 of its potential returns per unit of risk. Meta Platforms is currently generating about 0.06 per unit of risk. If you would invest 1,273 in Air Canada on August 29, 2024 and sell it today you would earn a total of 393.00 from holding Air Canada or generate 30.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Canada vs. Meta Platforms
Performance |
| Timeline |
| Air Canada |
| Meta Platforms |
Air Canada and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and Meta Platforms
The main advantage of trading using opposite Air Canada and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.The idea behind Air Canada and Meta Platforms 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.| Meta Platforms vs. ARISTOCRAT LEISURE | Meta Platforms vs. PLAYSTUDIOS A DL 0001 | Meta Platforms vs. FLOW TRADERS LTD | Meta Platforms vs. FAST RETAIL ADR |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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