Correlation Between Exchange Income and Transat AT
Can any of the company-specific risk be diversified away by investing in both Exchange Income and Transat AT 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 Exchange Income and Transat AT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exchange Income and Transat AT, you can compare the effects of market volatilities on Exchange Income and Transat AT 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 Exchange Income with a short position of Transat AT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exchange Income and Transat AT.
Diversification Opportunities for Exchange Income and Transat AT
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Exchange and Transat is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Income and Transat AT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transat AT and Exchange Income 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 Exchange Income are associated (or correlated) with Transat AT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transat AT has no effect on the direction of Exchange Income i.e., Exchange Income and Transat AT go up and down completely randomly.
Pair Corralation between Exchange Income and Transat AT
Assuming the 90 days trading horizon Exchange Income is expected to generate 0.39 times more return on investment than Transat AT. However, Exchange Income is 2.54 times less risky than Transat AT. It trades about 0.31 of its potential returns per unit of risk. Transat AT is currently generating about -0.02 per unit of risk. If you would invest 5,442 in Exchange Income on August 29, 2024 and sell it today you would earn a total of 245.00 from holding Exchange Income or generate 4.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exchange Income vs. Transat AT
Performance |
| Timeline |
| Exchange Income |
| Transat AT |
Exchange Income and Transat AT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exchange Income and Transat AT
The main advantage of trading using opposite Exchange Income and Transat AT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exchange Income position performs unexpectedly, Transat AT 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 Transat AT will offset losses from the drop in Transat AT's long position.| Exchange Income vs. Capital Power | Exchange Income vs. Keyera Corp | Exchange Income vs. Parkland Fuel | Exchange Income vs. TFI International |
| Transat AT vs. Chorus Aviation | Transat AT vs. Cineplex | Transat AT vs. Lion Electric Corp | Transat AT vs. Air Canada |
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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