Correlation Between Air Canada and Zimtu Capital

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

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

Diversification Opportunities for Air Canada and Zimtu Capital

0.68

Correlation Coefficient

Air Canada  Zimtu Capital

Poor diversification

The 3 months correlation between Air and Zimtu is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Zimtu Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zimtu Capital Corp 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 Zimtu Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zimtu Capital Corp has no effect on the direction of Air Canada i.e., Air Canada and Zimtu Capital go up and down completely randomly.

Pair Corralation between Air Canada and Zimtu Capital

Assuming the 90 days horizon Air Canada is expected to generate 0.25 times more return on investment than Zimtu Capital. However, Air Canada is 4.04 times less risky than Zimtu Capital. It trades about 0.08 of its potential returns per unit of risk. Zimtu Capital Corp is currently generating about 0.02 per unit of risk. If you would invest  1,796  in Air Canada on September 4, 2024 and sell it today you would earn a total of  694.00  from holding Air Canada or generate 38.64% return on investment over 90 days.

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

Air Canada  vs.  Zimtu Capital Corp

Air Canada

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Air Canada displayed solid returns over the last few months and may actually be approaching a breakup point.

Zimtu Capital Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zimtu Capital Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Zimtu Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Canada and Zimtu Capital

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

The idea behind Air Canada and Zimtu Capital Corp 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.