Correlation Between Snap and Air France
Can any of the company-specific risk be diversified away by investing in both Snap and Air France 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 Snap and Air France into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Air France KLM SA, you can compare the effects of market volatilities on Snap and Air France 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 Snap with a short position of Air France. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Air France.
Diversification Opportunities for Snap and Air France
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Snap and Air is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Air France KLM SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM and Snap 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 Snap Inc are associated (or correlated) with Air France. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Snap i.e., Snap and Air France go up and down completely randomly.
Pair Corralation between Snap and Air France
Given the investment horizon of 90 days Snap Inc is expected to generate 1.68 times more return on investment than Air France. However, Snap is 1.68 times more volatile than Air France KLM SA. It trades about 0.1 of its potential returns per unit of risk. Air France KLM SA is currently generating about -0.37 per unit of risk. If you would invest 1,071 in Snap Inc on August 29, 2024 and sell it today you would earn a total of 90.00 from holding Snap Inc or generate 8.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Air France KLM SA
Performance |
| Timeline |
| Snap Inc |
| Air France KLM |
Snap and Air France Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Air France
The main advantage of trading using opposite Snap and Air France positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Air France 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 France will offset losses from the drop in Air France's long position.The idea behind Snap Inc and Air France KLM SA 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 France vs. Covivio Hotels | Air France vs. Invibes Advertising NV | Air France vs. Broadpeak SA | Air France vs. Union Technologies Informatique |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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