Correlation Between Air Canada and Slate Grocery

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

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

Diversification Opportunities for Air Canada and Slate Grocery

0.27

Correlation Coefficient

Air Canada  Slate Grocery

Modest diversification

The 3 months correlation between Air and Slate is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Slate Grocery REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Slate Grocery REIT 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 Slate Grocery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Slate Grocery REIT has no effect on the direction of Air Canada i.e., Air Canada and Slate Grocery go up and down completely randomly.

Pair Corralation between Air Canada and Slate Grocery

Assuming the 90 days horizon Air Canada is expected to generate 1.99 times more return on investment than Slate Grocery. However, Air Canada is 1.99 times more volatile than Slate Grocery REIT. It trades about 0.21 of its potential returns per unit of risk. Slate Grocery REIT is currently generating about -0.08 per unit of risk. If you would invest  1,613  in Air Canada on October 1, 2024 and sell it today you would earn a total of  630.00  from holding Air Canada or generate 39.06% return on investment over 90 days.

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

Air Canada  vs.  Slate Grocery REIT

Air Canada

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Air Canada displayed solid returns over the last few months and may actually be approaching a breakup point.

Slate Grocery REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Slate Grocery REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Air Canada and Slate Grocery

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

The idea behind Air Canada and Slate Grocery REIT 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.