Correlation Between Air Transport and Singapore Airlines
Can any of the company-specific risk be diversified away by investing in both Air Transport and Singapore Airlines 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 Singapore Airlines 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 Singapore Airlines Limited, you can compare the effects of market volatilities on Air Transport and Singapore Airlines 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 Singapore Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Singapore Airlines.
Diversification Opportunities for Air Transport and Singapore Airlines
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Air and Singapore is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Singapore Airlines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Airlines 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 Singapore Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Airlines has no effect on the direction of Air Transport i.e., Air Transport and Singapore Airlines go up and down completely randomly.
Pair Corralation between Air Transport and Singapore Airlines
Assuming the 90 days horizon Air Transport Services is expected to generate 1.05 times more return on investment than Singapore Airlines. However, Air Transport is 1.05 times more volatile than Singapore Airlines Limited. It trades about 0.23 of its potential returns per unit of risk. Singapore Airlines Limited is currently generating about 0.09 per unit of risk. If you would invest 1,970 in Air Transport Services on September 5, 2024 and sell it today you would earn a total of 110.00 from holding Air Transport Services or generate 5.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. Singapore Airlines Limited
Performance |
| Timeline |
| Air Transport Services |
| Singapore Airlines |
Air Transport and Singapore Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and Singapore Airlines
The main advantage of trading using opposite Air Transport and Singapore Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport position performs unexpectedly, Singapore Airlines 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 Singapore Airlines will offset losses from the drop in Singapore Airlines' long position.| Air Transport vs. Airports of Thailand | Air Transport vs. Airports of Thailand | Air Transport vs. Aena SME SA | Air Transport vs. AENA SME UNSPADR110 |
| Singapore Airlines vs. Delta Air Lines | Singapore Airlines vs. AIR CHINA LTD | Singapore Airlines vs. RYANAIR HLDGS ADR | Singapore Airlines vs. China Southern Airlines |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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