Correlation Between Air France-KLM and EasyJet Plc
Can any of the company-specific risk be diversified away by investing in both Air France-KLM and EasyJet Plc 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-KLM and EasyJet Plc 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 easyJet plc, you can compare the effects of market volatilities on Air France-KLM and EasyJet Plc 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-KLM with a short position of EasyJet Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air France-KLM and EasyJet Plc.
Diversification Opportunities for Air France-KLM and EasyJet Plc
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Air and EasyJet is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA and easyJet plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on easyJet plc and Air France-KLM 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 EasyJet Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of easyJet plc has no effect on the direction of Air France-KLM i.e., Air France-KLM and EasyJet Plc go up and down completely randomly.
Pair Corralation between Air France-KLM and EasyJet Plc
Assuming the 90 days horizon Air France KLM SA is expected to under-perform the EasyJet Plc. In addition to that, Air France-KLM is 2.47 times more volatile than easyJet plc. It trades about -0.21 of its total potential returns per unit of risk. easyJet plc is currently generating about -0.23 per unit of volatility. If you would invest 667.00 in easyJet plc on August 27, 2024 and sell it today you would lose (48.00) from holding easyJet plc or give up 7.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air France KLM SA vs. easyJet plc
Performance |
| Timeline |
| Air France KLM |
| easyJet plc |
Air France-KLM and EasyJet Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air France-KLM and EasyJet Plc
The main advantage of trading using opposite Air France-KLM and EasyJet Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air France-KLM position performs unexpectedly, EasyJet Plc 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 EasyJet Plc will offset losses from the drop in EasyJet Plc's long position.| Air France-KLM vs. Cebu Air | Air France-KLM vs. easyJet plc | Air France-KLM vs. Norse Atlantic ASA | Air France-KLM vs. Air China Limited |
| EasyJet Plc vs. Finnair Oyj | EasyJet Plc vs. Norse Atlantic ASA | EasyJet Plc vs. Air New Zealand | EasyJet Plc vs. Air China Limited |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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