Correlation Between Air Canada and Capital Power
Can any of the company-specific risk be diversified away by investing in both Air Canada and Capital Power 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 Air Canada and Capital Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Capital Power, you can compare the effects of market volatilities on Air Canada and Capital Power 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 Air Canada with a short position of Capital Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Capital Power.
Diversification Opportunities for Air Canada and Capital Power
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Air and Capital is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Capital Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Power and Air Canada 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 Air Canada are associated (or correlated) with Capital Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Power has no effect on the direction of Air Canada i.e., Air Canada and Capital Power go up and down completely randomly.
Pair Corralation between Air Canada and Capital Power
Assuming the 90 days horizon Air Canada is expected to generate 3.15 times less return on investment than Capital Power. In addition to that, Air Canada is 1.29 times more volatile than Capital Power. It trades about 0.03 of its total potential returns per unit of risk. Capital Power is currently generating about 0.14 per unit of volatility. If you would invest 3,453 in Capital Power on September 26, 2024 and sell it today you would earn a total of 2,949 from holding Capital Power or generate 85.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Air Canada vs. Capital Power
Performance |
Timeline |
Air Canada |
Capital Power |
Air Canada and Capital Power Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Air Canada and Capital Power
The main advantage of trading using opposite Air Canada and Capital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Capital Power 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 Capital Power will offset losses from the drop in Capital Power's long position.Air Canada vs. Capital Power | Air Canada vs. Keyera Corp | Air Canada vs. Parkland Fuel | Air Canada vs. TFI International |
Capital Power vs. Canadian Utilities Limited | Capital Power vs. Emera Inc | Capital Power vs. Keyera Corp | Capital Power vs. Northland Power |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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