Correlation Between Air Transport and Westrock Coffee
Can any of the company-specific risk be diversified away by investing in both Air Transport and Westrock Coffee 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 Transport and Westrock Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Transport Services and Westrock Coffee, you can compare the effects of market volatilities on Air Transport and Westrock Coffee 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 Transport with a short position of Westrock Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Westrock Coffee.
Diversification Opportunities for Air Transport and Westrock Coffee
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Air and Westrock is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee and Air Transport 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 Transport Services are associated (or correlated) with Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of Air Transport i.e., Air Transport and Westrock Coffee go up and down completely randomly.
Pair Corralation between Air Transport and Westrock Coffee
Given the investment horizon of 90 days Air Transport Services is expected to generate 1.28 times more return on investment than Westrock Coffee. However, Air Transport is 1.28 times more volatile than Westrock Coffee. It trades about 0.0 of its potential returns per unit of risk. Westrock Coffee is currently generating about -0.03 per unit of risk. If you would invest 2,765 in Air Transport Services on September 2, 2024 and sell it today you would lose (569.00) from holding Air Transport Services or give up 20.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. Westrock Coffee
Performance |
| Timeline |
| Air Transport Services |
| Westrock Coffee |
Air Transport and Westrock Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and Westrock Coffee
The main advantage of trading using opposite Air Transport and Westrock Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport position performs unexpectedly, Westrock Coffee 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 Westrock Coffee will offset losses from the drop in Westrock Coffee's long position.| Air Transport vs. Copa Holdings SA | Air Transport vs. SkyWest | Air Transport vs. Sun Country Airlines | Air Transport vs. Frontier Group Holdings |
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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