Correlation Between Air Canada and PLDT
Can any of the company-specific risk be diversified away by investing in both Air Canada and PLDT 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 PLDT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and PLDT Inc, you can compare the effects of market volatilities on Air Canada and PLDT 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 PLDT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and PLDT.
Diversification Opportunities for Air Canada and PLDT
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Air and PLDT is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and PLDT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLDT Inc 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 PLDT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLDT Inc has no effect on the direction of Air Canada i.e., Air Canada and PLDT go up and down completely randomly.
Pair Corralation between Air Canada and PLDT
Assuming the 90 days trading horizon Air Canada is expected to generate 1.18 times more return on investment than PLDT. However, Air Canada is 1.18 times more volatile than PLDT Inc. It trades about 0.03 of its potential returns per unit of risk. PLDT Inc is currently generating about 0.0 per unit of risk. If you would invest 1,317 in Air Canada on September 3, 2024 and sell it today you would earn a total of 358.00 from holding Air Canada or generate 27.18% 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. PLDT Inc
Performance |
| Timeline |
| Air Canada |
| PLDT Inc |
Air Canada and PLDT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and PLDT
The main advantage of trading using opposite Air Canada and PLDT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, PLDT 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 PLDT will offset losses from the drop in PLDT's long position.The idea behind Air Canada and PLDT Inc 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.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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