Correlation Between Air Transport and First Republic

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

Diversification Opportunities for Air Transport and First Republic

-0.54

Correlation Coefficient

Air Transport  First Republic

Excellent diversification

The 3 months correlation between Air and First is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and First Republic Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Republic Bank 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 First Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Republic Bank has no effect on the direction of Air Transport i.e., Air Transport and First Republic go up and down completely randomly.

Pair Corralation between Air Transport and First Republic

Given the investment horizon of 90 days Air Transport Services is expected to generate 0.1 times more return on investment than First Republic. However, Air Transport Services is 10.4 times less risky than First Republic. It trades about 0.0 of its potential returns per unit of risk. First Republic Bank is currently generating about -0.01 per unit of risk. If you would invest  2,699  in Air Transport Services on September 28, 2024 and sell it today you would lose (504.00) from holding Air Transport Services or give up 18.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	30.92%
Values	Daily Returns

Air Transport Services  vs.  First Republic Bank

Air Transport Services

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

First Republic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Republic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, First Republic is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Air Transport and First Republic

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

The idea behind Air Transport Services and First Republic Bank 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.