Correlation Between Air France and La Francaise

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

By analyzing existing cross correlation between Air France KLM SA and La Francaise Des, you can compare the effects of market volatilities on Air France and La Francaise 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 France with a short position of La Francaise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air France and La Francaise.

Diversification Opportunities for Air France and La Francaise

-0.25

Correlation Coefficient

Air France  La Francaise

Very good diversification

The 3 months correlation between Air and FDJ is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA and La Francaise Des in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La Francaise Des and Air France 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 France KLM SA are associated (or correlated) with La Francaise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La Francaise Des has no effect on the direction of Air France i.e., Air France and La Francaise go up and down completely randomly.

Pair Corralation between Air France and La Francaise

Assuming the 90 days horizon Air France KLM SA is expected to under-perform the La Francaise. In addition to that, Air France is 1.84 times more volatile than La Francaise Des. It trades about -0.05 of its total potential returns per unit of risk. La Francaise Des is currently generating about 0.0 per unit of volatility. If you would invest  3,676  in La Francaise Des on October 11, 2024 and sell it today you would lose (102.00) from holding La Francaise Des or give up 2.77% of portfolio value over 90 days.

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

Air France KLM SA  vs.  La Francaise Des

Air France KLM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air France KLM SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

La Francaise Des

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days La Francaise Des has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking indicators, La Francaise is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Air France and La Francaise

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

The idea behind Air France KLM SA and La Francaise Des 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.