Correlation Between Air Canada and Brown Forman
Can any of the company-specific risk be diversified away by investing in both Air Canada and Brown Forman 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 Brown Forman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Brown Forman, you can compare the effects of market volatilities on Air Canada and Brown Forman 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 Brown Forman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Brown Forman.
Diversification Opportunities for Air Canada and Brown Forman
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Air and Brown is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman 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 Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of Air Canada i.e., Air Canada and Brown Forman go up and down completely randomly.
Pair Corralation between Air Canada and Brown Forman
Assuming the 90 days trading horizon Air Canada is expected to generate 1.14 times more return on investment than Brown Forman. However, Air Canada is 1.14 times more volatile than Brown Forman. It trades about 0.01 of its potential returns per unit of risk. Brown Forman is currently generating about -0.07 per unit of risk. If you would invest 1,021 in Air Canada on December 10, 2024 and sell it today you would earn a total of 5.00 from holding Air Canada or generate 0.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Air Canada vs. Brown Forman
Performance |
Timeline |
Air Canada |
Brown Forman |
Air Canada and Brown Forman Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Air Canada and Brown Forman
The main advantage of trading using opposite Air Canada and Brown Forman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Brown Forman 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 Brown Forman will offset losses from the drop in Brown Forman's long position.Air Canada vs. ANTA Sports Products | Air Canada vs. Ming Le Sports | Air Canada vs. Gaming and Leisure | Air Canada vs. HOCHSCHILD MINING |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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