Correlation Between Cronos and Air Canada
Can any of the company-specific risk be diversified away by investing in both Cronos and Air Canada 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 Cronos and Air Canada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cronos Group and Air Canada, you can compare the effects of market volatilities on Cronos and Air Canada 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 Cronos with a short position of Air Canada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cronos and Air Canada.
Diversification Opportunities for Cronos and Air Canada
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cronos and Air is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Cronos Group and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada and Cronos 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 Cronos Group are associated (or correlated) with Air Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Canada has no effect on the direction of Cronos i.e., Cronos and Air Canada go up and down completely randomly.
Pair Corralation between Cronos and Air Canada
Assuming the 90 days trading horizon Cronos Group is expected to under-perform the Air Canada. In addition to that, Cronos is 1.21 times more volatile than Air Canada. It trades about -0.32 of its total potential returns per unit of risk. Air Canada is currently generating about 0.2 per unit of volatility. If you would invest 2,340 in Air Canada on September 13, 2024 and sell it today you would earn a total of 165.00 from holding Air Canada or generate 7.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cronos Group vs. Air Canada
Performance |
| Timeline |
| Cronos Group |
| Air Canada |
Cronos and Air Canada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cronos and Air Canada
The main advantage of trading using opposite Cronos and Air Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cronos position performs unexpectedly, Air Canada 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 Canada will offset losses from the drop in Air Canada's long position.The idea behind Cronos Group and Air Canada 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 Canada vs. Lycos Energy | Air Canada vs. Scandium Canada | Air Canada vs. Voice Mobility International | Air Canada vs. Martina Minerals Corp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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