Correlation Between Air Transport and Compania Cervecerias

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

By analyzing existing cross correlation between Air Transport Services and Compania Cervecerias Unidas, you can compare the effects of market volatilities on Air Transport and Compania Cervecerias 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 Transport with a short position of Compania Cervecerias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Compania Cervecerias.

Diversification Opportunities for Air Transport and Compania Cervecerias

0.75

Correlation Coefficient

Air Transport  Compania Cervecerias

Poor diversification

The 3 months correlation between Air and Compania is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias and Air Transport 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 Transport Services are associated (or correlated) with Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of Air Transport i.e., Air Transport and Compania Cervecerias go up and down completely randomly.

Pair Corralation between Air Transport and Compania Cervecerias

Given the investment horizon of 90 days Air Transport is expected to generate 14.39 times less return on investment than Compania Cervecerias. But when comparing it to its historical volatility, Air Transport Services is 10.74 times less risky than Compania Cervecerias. It trades about 0.24 of its potential returns per unit of risk. Compania Cervecerias Unidas is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,162  in Compania Cervecerias Unidas on December 19, 2024 and sell it today you would earn a total of  347.00  from holding Compania Cervecerias Unidas or generate 29.86% return on investment over 90 days.

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

Air Transport Services  vs.  Compania Cervecerias Unidas

Air Transport Services

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Air Transport is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Compania Cervecerias

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Compania Cervecerias unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Transport and Compania Cervecerias

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

The idea behind Air Transport Services and Compania Cervecerias Unidas 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..