Correlation Between Air Transport and AP Møller

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

Diversification Opportunities for Air Transport and AP Møller

0.86

Correlation Coefficient

Air Transport  AP Møller

Very poor diversification

The 3 months correlation between Air and DP4B is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Møller 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 AP Møller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Møller has no effect on the direction of Air Transport i.e., Air Transport and AP Møller go up and down completely randomly.

Pair Corralation between Air Transport and AP Møller

Assuming the 90 days horizon Air Transport is expected to generate 13.53 times less return on investment than AP Møller. But when comparing it to its historical volatility, Air Transport Services is 1.3 times less risky than AP Møller. It trades about 0.0 of its potential returns per unit of risk. AP Mller is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  114,698  in AP Mller on October 4, 2024 and sell it today you would earn a total of  46,002  from holding AP Mller or generate 40.11% return on investment over 90 days.

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

Air Transport Services  vs.  AP Mller

Air Transport Services

Risk-Adjusted Performance

18 of 100

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 fragile basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

AP Møller

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Air Transport and AP Møller

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

The idea behind Air Transport Services and AP Mller 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.