Correlation Between Air Transport and Western Acquisition

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

Diversification Opportunities for Air Transport and Western Acquisition

0.65

Correlation Coefficient

Air Transport  Western Acquisition

Poor diversification

The 3 months correlation between Air and Western is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition 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 Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of Air Transport i.e., Air Transport and Western Acquisition go up and down completely randomly.

Pair Corralation between Air Transport and Western Acquisition

Given the investment horizon of 90 days Air Transport Services is expected to under-perform the Western Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Air Transport Services is 4.81 times less risky than Western Acquisition. The stock trades about -0.13 of its potential returns per unit of risk. The Western Acquisition Ventures is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,154  in Western Acquisition Ventures on October 10, 2024 and sell it today you would earn a total of  87.00  from holding Western Acquisition Ventures or generate 7.54% 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.  Western Acquisition Ventures

Air Transport Services

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 14 (%) 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.

Western Acquisition

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Western Acquisition unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Transport and Western Acquisition

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

The idea behind Air Transport Services and Western Acquisition Ventures 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 Commodity Directory module to find actively traded commodities issued by global exchanges.