Correlation Between Flight Centre and Superior Plus
Can any of the company-specific risk be diversified away by investing in both Flight Centre and Superior Plus 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 Flight Centre and Superior Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flight Centre Travel and Superior Plus Corp, you can compare the effects of market volatilities on Flight Centre and Superior Plus 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 Flight Centre with a short position of Superior Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flight Centre and Superior Plus.
Diversification Opportunities for Flight Centre and Superior Plus
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Flight and Superior is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Flight Centre Travel and Superior Plus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Plus Corp and Flight Centre 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 Flight Centre Travel are associated (or correlated) with Superior Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Plus Corp has no effect on the direction of Flight Centre i.e., Flight Centre and Superior Plus go up and down completely randomly.
Pair Corralation between Flight Centre and Superior Plus
Assuming the 90 days horizon Flight Centre Travel is expected to generate 0.96 times more return on investment than Superior Plus. However, Flight Centre Travel is 1.04 times less risky than Superior Plus. It trades about -0.02 of its potential returns per unit of risk. Superior Plus Corp is currently generating about -0.03 per unit of risk. If you would invest 1,162 in Flight Centre Travel on September 14, 2024 and sell it today you would lose (187.00) from holding Flight Centre Travel or give up 16.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flight Centre Travel vs. Superior Plus Corp
Performance |
| Timeline |
| Flight Centre Travel |
| Superior Plus Corp |
Flight Centre and Superior Plus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flight Centre and Superior Plus
The main advantage of trading using opposite Flight Centre and Superior Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flight Centre position performs unexpectedly, Superior Plus 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 Superior Plus will offset losses from the drop in Superior Plus' long position.| Flight Centre vs. National Bank Holdings | Flight Centre vs. SANOK RUBBER ZY | Flight Centre vs. Rayonier Advanced Materials | Flight Centre vs. GOODYEAR T RUBBER |
| Superior Plus vs. Boiron SA | Superior Plus vs. COSMOSTEEL HLDGS | Superior Plus vs. Vastned Retail NV | Superior Plus vs. BURLINGTON STORES |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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