Correlation Between Air Transport and Safety Insurance
Can any of the company-specific risk be diversified away by investing in both Air Transport and Safety Insurance 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 Safety Insurance 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 Safety Insurance Group, you can compare the effects of market volatilities on Air Transport and Safety Insurance 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 Safety Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Safety Insurance.
Diversification Opportunities for Air Transport and Safety Insurance
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Safety is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Safety Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Insurance 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 Safety Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Insurance has no effect on the direction of Air Transport i.e., Air Transport and Safety Insurance go up and down completely randomly.
Pair Corralation between Air Transport and Safety Insurance
Assuming the 90 days horizon Air Transport Services is expected to generate 1.95 times more return on investment than Safety Insurance. However, Air Transport is 1.95 times more volatile than Safety Insurance Group. It trades about 0.07 of its potential returns per unit of risk. Safety Insurance Group is currently generating about 0.05 per unit of risk. If you would invest 1,410 in Air Transport Services on August 25, 2024 and sell it today you would earn a total of 670.00 from holding Air Transport Services or generate 47.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. Safety Insurance Group
Performance |
| Timeline |
| Air Transport Services |
| Safety Insurance |
Air Transport and Safety Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and Safety Insurance
The main advantage of trading using opposite Air Transport and Safety Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport position performs unexpectedly, Safety Insurance 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 Safety Insurance will offset losses from the drop in Safety Insurance's long position.| Air Transport vs. OURGAME INTHOLDL 00005 | Air Transport vs. Penn National Gaming | Air Transport vs. Games Workshop Group | Air Transport vs. PENN NATL GAMING |
| Safety Insurance vs. Insurance Australia Group | Safety Insurance vs. Superior Plus Corp | Safety Insurance vs. NMI Holdings | Safety Insurance vs. Origin Agritech |
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 Stocks Directory module to find actively traded stocks across global markets.
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