Correlation Between Industrial and Spring Airlines

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

By analyzing existing cross correlation between Industrial and Commercial and Spring Airlines Co, you can compare the effects of market volatilities on Industrial and Spring Airlines 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 Industrial with a short position of Spring Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Spring Airlines.

Diversification Opportunities for Industrial and Spring Airlines

-0.63

Correlation Coefficient

Industrial  Spring Airlines

Excellent diversification

The 3 months correlation between Industrial and Spring is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Spring Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spring Airlines and Industrial 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 Industrial and Commercial are associated (or correlated) with Spring Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spring Airlines has no effect on the direction of Industrial i.e., Industrial and Spring Airlines go up and down completely randomly.

Pair Corralation between Industrial and Spring Airlines

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.77 times more return on investment than Spring Airlines. However, Industrial and Commercial is 1.31 times less risky than Spring Airlines. It trades about 0.16 of its potential returns per unit of risk. Spring Airlines Co is currently generating about -0.04 per unit of risk. If you would invest  613.00  in Industrial and Commercial on December 2, 2024 and sell it today you would earn a total of  74.00  from holding Industrial and Commercial or generate 12.07% return on investment over 90 days.

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

Industrial and Commercial  vs.  Spring Airlines Co

Industrial and Commercial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Spring Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spring Airlines Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Spring Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Industrial and Spring Airlines

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

The idea behind Industrial and Commercial and Spring Airlines Co 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.