Correlation Between Air Transport and Vita Coco

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

Diversification Opportunities for Air Transport and Vita Coco

0.08

Correlation Coefficient

Air Transport  Vita Coco

Significant diversification

The 3 months correlation between Air and Vita is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco 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 Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of Air Transport i.e., Air Transport and Vita Coco go up and down completely randomly.

Pair Corralation between Air Transport and Vita Coco

Given the investment horizon of 90 days Air Transport Services is expected to generate 0.04 times more return on investment than Vita Coco. However, Air Transport Services is 23.87 times less risky than Vita Coco. It trades about 0.23 of its potential returns per unit of risk. Vita Coco is currently generating about -0.06 per unit of risk. If you would invest  2,195  in Air Transport Services on December 26, 2024 and sell it today you would earn a total of  39.00  from holding Air Transport Services or generate 1.78% return on investment over 90 days.

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

Air Transport Services  vs.  Vita Coco

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 18 (%) 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.

Vita Coco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vita Coco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Air Transport and Vita Coco

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

The idea behind Air Transport Services and Vita Coco 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .