Correlation Between Air France and Diagnostic Medical
Can any of the company-specific risk be diversified away by investing in both Air France and Diagnostic Medical 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 France and Diagnostic Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air France KLM SA and Diagnostic Medical Systems, you can compare the effects of market volatilities on Air France and Diagnostic Medical 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 France with a short position of Diagnostic Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air France and Diagnostic Medical.
Diversification Opportunities for Air France and Diagnostic Medical
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Air and Diagnostic is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA and Diagnostic Medical Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diagnostic Medical and Air France 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 France KLM SA are associated (or correlated) with Diagnostic Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diagnostic Medical has no effect on the direction of Air France i.e., Air France and Diagnostic Medical go up and down completely randomly.
Pair Corralation between Air France and Diagnostic Medical
Assuming the 90 days horizon Air France KLM SA is expected to under-perform the Diagnostic Medical. But the stock apears to be less risky and, when comparing its historical volatility, Air France KLM SA is 1.5 times less risky than Diagnostic Medical. The stock trades about -0.15 of its potential returns per unit of risk. The Diagnostic Medical Systems is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 89.00 in Diagnostic Medical Systems on October 26, 2024 and sell it today you would lose (15.00) from holding Diagnostic Medical Systems or give up 16.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air France KLM SA vs. Diagnostic Medical Systems
Performance |
| Timeline |
| Air France KLM |
| Diagnostic Medical |
Air France and Diagnostic Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air France and Diagnostic Medical
The main advantage of trading using opposite Air France and Diagnostic Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air France position performs unexpectedly, Diagnostic Medical 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 Diagnostic Medical will offset losses from the drop in Diagnostic Medical's long position.| Air France vs. Diagnostic Medical Systems | Air France vs. Media 6 SA | Air France vs. Les Hotels Bav | Air France vs. Hoteles Bestprice SA |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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