Correlation Between Big 5 and Air Transport
Can any of the company-specific risk be diversified away by investing in both Big 5 and Air Transport 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 Big 5 and Air Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and Air Transport Services, you can compare the effects of market volatilities on Big 5 and Air Transport 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 Big 5 with a short position of Air Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Air Transport.
Diversification Opportunities for Big 5 and Air Transport
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Big and Air is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Air Transport Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Transport Services and Big 5 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 Big 5 Sporting are associated (or correlated) with Air Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Transport Services has no effect on the direction of Big 5 i.e., Big 5 and Air Transport go up and down completely randomly.
Pair Corralation between Big 5 and Air Transport
Assuming the 90 days horizon Big 5 Sporting is expected to under-perform the Air Transport. In addition to that, Big 5 is 1.29 times more volatile than Air Transport Services. It trades about -0.07 of its total potential returns per unit of risk. Air Transport Services is currently generating about 0.0 per unit of volatility. If you would invest 2,640 in Air Transport Services on August 24, 2024 and sell it today you would lose (580.00) from holding Air Transport Services or give up 21.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big 5 Sporting vs. Air Transport Services
Performance |
| Timeline |
| Big 5 Sporting |
| Air Transport Services |
Big 5 and Air Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and Air Transport
The main advantage of trading using opposite Big 5 and Air Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, Air Transport 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 Air Transport will offset losses from the drop in Air Transport's long position.The idea behind Big 5 Sporting and Air Transport Services pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Air Transport vs. ANTA SPORTS PRODUCT | Air Transport vs. JD SPORTS FASH | Air Transport vs. PLAY2CHILL SA ZY | Air Transport vs. Ming Le Sports |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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