Correlation Between Air Transport and Columbia Sportswear

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

Diversification Opportunities for Air Transport and Columbia Sportswear

-0.29

Correlation Coefficient

Air Transport  Columbia Sportswear

Very good diversification

The 3 months correlation between Air and Columbia is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Columbia Sportswear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Sportswear 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 Columbia Sportswear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Sportswear has no effect on the direction of Air Transport i.e., Air Transport and Columbia Sportswear go up and down completely randomly.

Pair Corralation between Air Transport and Columbia Sportswear

Assuming the 90 days horizon Air Transport is expected to generate 6.0 times less return on investment than Columbia Sportswear. But when comparing it to its historical volatility, Air Transport Services is 5.27 times less risky than Columbia Sportswear. It trades about 0.0 of its potential returns per unit of risk. Columbia Sportswear is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  8,650  in Columbia Sportswear on December 2, 2024 and sell it today you would lose (50.00) from holding Columbia Sportswear or give up 0.58% of portfolio value over 90 days.

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

Air Transport Services  vs.  Columbia Sportswear

Air Transport Services

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 6 (%) 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.

Columbia Sportswear

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Columbia Sportswear is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Air Transport and Columbia Sportswear

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

The idea behind Air Transport Services and Columbia Sportswear 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.