Correlation Between Air Canada and Blackline

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

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

Diversification Opportunities for Air Canada and Blackline

0.84

Correlation Coefficient

Air Canada  Blackline

Very poor diversification

The 3 months correlation between Air and Blackline is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Blackline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackline 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 Blackline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackline has no effect on the direction of Air Canada i.e., Air Canada and Blackline go up and down completely randomly.

Pair Corralation between Air Canada and Blackline

Assuming the 90 days trading horizon Air Canada is expected to generate 1.88 times more return on investment than Blackline. However, Air Canada is 1.88 times more volatile than Blackline. It trades about -0.26 of its potential returns per unit of risk. Blackline is currently generating about -0.5 per unit of risk. If you would invest  1,668  in Air Canada on October 15, 2024 and sell it today you would lose (204.00) from holding Air Canada or give up 12.23% 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.  Blackline

Air Canada

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Air Canada unveiled solid returns over the last few months and may actually be approaching a breakup point.

Blackline

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blackline are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Blackline is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Air Canada and Blackline

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

The idea behind Air Canada and Blackline 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 Anywhere module to track or share privately all of your investments from the convenience of any device.