Correlation Between Air Transport and Archer Daniels

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

Diversification Opportunities for Air Transport and Archer Daniels

-0.8

Correlation Coefficient

Air Transport  Archer Daniels

Pay attention - limited upside

The 3 months correlation between Air and Archer is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Archer Daniels Midland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Daniels Midland 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 Archer Daniels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Daniels Midland has no effect on the direction of Air Transport i.e., Air Transport and Archer Daniels go up and down completely randomly.

Pair Corralation between Air Transport and Archer Daniels

Assuming the 90 days horizon Air Transport Services is expected to generate 1.43 times more return on investment than Archer Daniels. However, Air Transport is 1.43 times more volatile than Archer Daniels Midland. It trades about 0.0 of its potential returns per unit of risk. Archer Daniels Midland is currently generating about -0.04 per unit of risk. If you would invest  2,440  in Air Transport Services on September 16, 2024 and sell it today you would lose (360.00) from holding Air Transport Services or give up 14.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.06%
Values	Daily Returns

Air Transport Services  vs.  Archer Daniels Midland

Air Transport Services

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Archer Daniels Midland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archer Daniels Midland has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Archer Daniels is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Air Transport and Archer Daniels

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

The idea behind Air Transport Services and Archer Daniels Midland 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.