Correlation Between Air Canada and Brompton Split

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

By analyzing existing cross correlation between Air Canada and Brompton Split Banc, you can compare the effects of market volatilities on Air Canada and Brompton Split 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 Brompton Split. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Brompton Split.

Diversification Opportunities for Air Canada and Brompton Split

0.83

Correlation Coefficient

Air Canada  Brompton Split

Very poor diversification

The 3 months correlation between Air and Brompton is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Brompton Split Banc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton Split Banc 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 Brompton Split. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton Split Banc has no effect on the direction of Air Canada i.e., Air Canada and Brompton Split go up and down completely randomly.

Pair Corralation between Air Canada and Brompton Split

Assuming the 90 days horizon Air Canada is expected to under-perform the Brompton Split. In addition to that, Air Canada is 1.61 times more volatile than Brompton Split Banc. It trades about -0.39 of its total potential returns per unit of risk. Brompton Split Banc is currently generating about -0.09 per unit of volatility. If you would invest  982.00  in Brompton Split Banc on December 29, 2024 and sell it today you would lose (63.00) from holding Brompton Split Banc or give up 6.42% of portfolio value over 90 days.

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

Air Canada  vs.  Brompton Split Banc

Air Canada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Brompton Split Banc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brompton Split Banc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Brompton Split is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Air Canada and Brompton Split

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

The idea behind Air Canada and Brompton Split Banc 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.