Correlation Between Air Canada and HOCHSCHILD MINING
Can any of the company-specific risk be diversified away by investing in both Air Canada and HOCHSCHILD MINING 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 HOCHSCHILD MINING into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and HOCHSCHILD MINING, you can compare the effects of market volatilities on Air Canada and HOCHSCHILD MINING 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 HOCHSCHILD MINING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and HOCHSCHILD MINING.
Diversification Opportunities for Air Canada and HOCHSCHILD MINING
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and HOCHSCHILD is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and HOCHSCHILD MINING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOCHSCHILD MINING 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 HOCHSCHILD MINING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOCHSCHILD MINING has no effect on the direction of Air Canada i.e., Air Canada and HOCHSCHILD MINING go up and down completely randomly.
Pair Corralation between Air Canada and HOCHSCHILD MINING
Assuming the 90 days trading horizon Air Canada is expected to generate 5.05 times less return on investment than HOCHSCHILD MINING. But when comparing it to its historical volatility, Air Canada is 1.6 times less risky than HOCHSCHILD MINING. It trades about 0.03 of its potential returns per unit of risk. HOCHSCHILD MINING is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 89.00 in HOCHSCHILD MINING on August 31, 2024 and sell it today you would earn a total of 172.00 from holding HOCHSCHILD MINING or generate 193.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Air Canada vs. HOCHSCHILD MINING
Performance |
| Timeline |
| Air Canada |
| HOCHSCHILD MINING |
Air Canada and HOCHSCHILD MINING Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and HOCHSCHILD MINING
The main advantage of trading using opposite Air Canada and HOCHSCHILD MINING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, HOCHSCHILD MINING 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 HOCHSCHILD MINING will offset losses from the drop in HOCHSCHILD MINING's long position.| Air Canada vs. ONWARD MEDICAL BV | Air Canada vs. Merit Medical Systems | Air Canada vs. Ribbon Communications | Air Canada vs. Japan Medical Dynamic |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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