Correlation Between Air Canada and Freshpet
Can any of the company-specific risk be diversified away by investing in both Air Canada and Freshpet 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 Freshpet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Freshpet, you can compare the effects of market volatilities on Air Canada and Freshpet 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 Freshpet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Freshpet.
Diversification Opportunities for Air Canada and Freshpet
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Air and Freshpet is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet 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 Freshpet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freshpet has no effect on the direction of Air Canada i.e., Air Canada and Freshpet go up and down completely randomly.
Pair Corralation between Air Canada and Freshpet
Assuming the 90 days trading horizon Air Canada is expected to generate 1.15 times more return on investment than Freshpet. However, Air Canada is 1.15 times more volatile than Freshpet. It trades about 0.08 of its potential returns per unit of risk. Freshpet is currently generating about 0.05 per unit of risk. If you would invest 1,141 in Air Canada on September 23, 2024 and sell it today you would earn a total of 297.00 from holding Air Canada or generate 26.03% 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. Freshpet
Performance |
Timeline |
Air Canada |
Freshpet |
Air Canada and Freshpet Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Air Canada and Freshpet
The main advantage of trading using opposite Air Canada and Freshpet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Freshpet 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 Freshpet will offset losses from the drop in Freshpet's long position.Air Canada vs. FARO Technologies | Air Canada vs. ePlay Digital | Air Canada vs. KOOL2PLAY SA ZY | Air Canada vs. LG Display Co |
Freshpet vs. AEGEAN AIRLINES | Freshpet vs. AM EAGLE OUTFITTERS | Freshpet vs. Singapore Airlines Limited | Freshpet vs. International Consolidated Airlines |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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