Correlation Between Air Canada and Hufvudstaden
Can any of the company-specific risk be diversified away by investing in both Air Canada and Hufvudstaden 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 Hufvudstaden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Hufvudstaden AB, you can compare the effects of market volatilities on Air Canada and Hufvudstaden 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 Hufvudstaden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Hufvudstaden.
Diversification Opportunities for Air Canada and Hufvudstaden
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Air and Hufvudstaden is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Hufvudstaden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hufvudstaden AB 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 Hufvudstaden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hufvudstaden AB has no effect on the direction of Air Canada i.e., Air Canada and Hufvudstaden go up and down completely randomly.
Pair Corralation between Air Canada and Hufvudstaden
Assuming the 90 days trading horizon Air Canada is expected to generate 2.53 times more return on investment than Hufvudstaden. However, Air Canada is 2.53 times more volatile than Hufvudstaden AB. It trades about 0.38 of its potential returns per unit of risk. Hufvudstaden AB is currently generating about -0.05 per unit of risk. If you would invest 1,237 in Air Canada on September 1, 2024 and sell it today you would earn a total of 438.00 from holding Air Canada or generate 35.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Canada vs. Hufvudstaden AB
Performance |
| Timeline |
| Air Canada |
| Hufvudstaden AB |
Air Canada and Hufvudstaden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and Hufvudstaden
The main advantage of trading using opposite Air Canada and Hufvudstaden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Hufvudstaden 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 Hufvudstaden will offset losses from the drop in Hufvudstaden's long position.| Air Canada vs. United Utilities Group | Air Canada vs. PARKEN Sport Entertainment | Air Canada vs. Canadian Utilities Limited | Air Canada vs. UNITED UTILITIES GR |
| Hufvudstaden vs. Vulcan Materials | Hufvudstaden vs. VULCAN MATERIALS | Hufvudstaden vs. Evolution Mining Limited | Hufvudstaden vs. Martin Marietta Materials |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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