Correlation Between Air Canada and Walmart
Can any of the company-specific risk be diversified away by investing in both Air Canada and Walmart 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 Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Walmart, you can compare the effects of market volatilities on Air Canada and Walmart 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 Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Walmart.
Diversification Opportunities for Air Canada and Walmart
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Air and Walmart is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Air Canada i.e., Air Canada and Walmart go up and down completely randomly.
Pair Corralation between Air Canada and Walmart
Assuming the 90 days trading horizon Air Canada is expected to generate 3.53 times more return on investment than Walmart. However, Air Canada is 3.53 times more volatile than Walmart. It trades about 0.34 of its potential returns per unit of risk. Walmart is currently generating about 0.5 per unit of risk. If you would invest 1,273 in Air Canada on August 27, 2024 and sell it today you would earn a total of 377.00 from holding Air Canada or generate 29.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Canada vs. Walmart
Performance |
| Timeline |
| Air Canada |
| Walmart |
Air Canada and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and Walmart
The main advantage of trading using opposite Air Canada and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.The idea behind Air Canada and Walmart 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.| Walmart vs. Air Lease | Walmart vs. GEELY AUTOMOBILE | Walmart vs. United Rentals | Walmart vs. SERI INDUSTRIAL EO |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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