Correlation Between AEGEAN AIRLINES and OtelloASA

Can any of the company-specific risk be diversified away by investing in both AEGEAN AIRLINES and OtelloASA 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 AEGEAN AIRLINES and OtelloASA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AEGEAN AIRLINES and Otello ASA, you can compare the effects of market volatilities on AEGEAN AIRLINES and OtelloASA 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 AEGEAN AIRLINES with a short position of OtelloASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of AEGEAN AIRLINES and OtelloASA.

Diversification Opportunities for AEGEAN AIRLINES and OtelloASA

0.4

Correlation Coefficient

AEGEAN AIRLINES  OtelloASA

Very weak diversification

The 3 months correlation between AEGEAN and OtelloASA is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding AEGEAN AIRLINES and Otello ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otello ASA and AEGEAN AIRLINES 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 AEGEAN AIRLINES are associated (or correlated) with OtelloASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otello ASA has no effect on the direction of AEGEAN AIRLINES i.e., AEGEAN AIRLINES and OtelloASA go up and down completely randomly.

Pair Corralation between AEGEAN AIRLINES and OtelloASA

Assuming the 90 days trading horizon AEGEAN AIRLINES is expected to under-perform the OtelloASA. But the stock apears to be less risky and, when comparing its historical volatility, AEGEAN AIRLINES is 1.31 times less risky than OtelloASA. The stock trades about -0.08 of its potential returns per unit of risk. The Otello ASA is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Otello ASA on September 12, 2024 and sell it today you would lose (5.00) from holding Otello ASA or give up 7.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

AEGEAN AIRLINES  vs.  Otello ASA

AEGEAN AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEGEAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Otello ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otello ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with AEGEAN AIRLINES and OtelloASA

The main advantage of trading using opposite AEGEAN AIRLINES and OtelloASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AEGEAN AIRLINES position performs unexpectedly, OtelloASA 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 OtelloASA will offset losses from the drop in OtelloASA's long position.

The idea behind AEGEAN AIRLINES and Otello ASA 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.