Correlation Between Air Canada and Mitie Group

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

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

Diversification Opportunities for Air Canada and Mitie Group

-0.73

Correlation Coefficient

Air Canada  Mitie Group

Pay attention - limited upside

The 3 months correlation between Air and Mitie is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Mitie Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitie Group PLC 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 Mitie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitie Group PLC has no effect on the direction of Air Canada i.e., Air Canada and Mitie Group go up and down completely randomly.

Pair Corralation between Air Canada and Mitie Group

Assuming the 90 days trading horizon Air Canada is expected to under-perform the Mitie Group. In addition to that, Air Canada is 2.57 times more volatile than Mitie Group PLC. It trades about -0.25 of its total potential returns per unit of risk. Mitie Group PLC is currently generating about 0.11 per unit of volatility. If you would invest  113,600  in Mitie Group PLC on September 23, 2024 and sell it today you would earn a total of  2,450  from holding Mitie Group PLC or generate 2.16% return on investment over 90 days.

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

Air Canada  vs.  Mitie Group PLC

Air Canada

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 13 (%) 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.

Mitie Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitie Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Mitie Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Air Canada and Mitie Group

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

The idea behind Air Canada and Mitie Group PLC 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.