Correlation Between Air Canada and Microsoft
Can any of the company-specific risk be diversified away by investing in both Air Canada and Microsoft 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 Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Microsoft, you can compare the effects of market volatilities on Air Canada and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Microsoft.
Diversification Opportunities for Air Canada and Microsoft
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Microsoft is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Air Canada i.e., Air Canada and Microsoft go up and down completely randomly.
Pair Corralation between Air Canada and Microsoft
Assuming the 90 days trading horizon Air Canada is expected to generate 3.32 times less return on investment than Microsoft. In addition to that, Air Canada is 1.57 times more volatile than Microsoft. It trades about 0.02 of its total potential returns per unit of risk. Microsoft is currently generating about 0.09 per unit of volatility. If you would invest 23,469 in Microsoft on August 27, 2024 and sell it today you would earn a total of 16,286 from holding Microsoft or generate 69.39% 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. Microsoft
Performance |
| Timeline |
| Air Canada |
| Microsoft |
Air Canada and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and Microsoft
The main advantage of trading using opposite Air Canada and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.The idea behind Air Canada and Microsoft 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.| Microsoft vs. AGF Management Limited | Microsoft vs. CHINA EDUCATION GROUP | Microsoft vs. DeVry Education Group | Microsoft vs. Brockhaus Capital Management |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| CEOs Directory Screen CEOs from public companies around the world |