Correlation Between Air France and Fiducial Office

Can any of the company-specific risk be diversified away by investing in both Air France and Fiducial Office 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 Fiducial Office 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 Fiducial Office Solutions, you can compare the effects of market volatilities on Air France and Fiducial Office 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 Fiducial Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air France and Fiducial Office.

Diversification Opportunities for Air France and Fiducial Office

-0.63

Correlation Coefficient

Air France  Fiducial Office

Excellent diversification

The 3 months correlation between Air and Fiducial is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA and Fiducial Office Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiducial Office Solutions 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 Fiducial Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiducial Office Solutions has no effect on the direction of Air France i.e., Air France and Fiducial Office go up and down completely randomly.

Pair Corralation between Air France and Fiducial Office

Assuming the 90 days horizon Air France KLM SA is expected to generate 14.29 times more return on investment than Fiducial Office. However, Air France is 14.29 times more volatile than Fiducial Office Solutions. It trades about 0.07 of its potential returns per unit of risk. Fiducial Office Solutions is currently generating about -0.13 per unit of risk. If you would invest  809.00  in Air France KLM SA on December 22, 2024 and sell it today you would earn a total of  140.00  from holding Air France KLM SA or generate 17.31% return on investment over 90 days.

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

Air France KLM SA  vs.  Fiducial Office Solutions

Air France KLM

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air France KLM SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air France sustained solid returns over the last few months and may actually be approaching a breakup point.

Fiducial Office Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fiducial Office Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fiducial Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Air France and Fiducial Office

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

The idea behind Air France KLM SA and Fiducial Office Solutions 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.