Correlation Between Air Transport and Komatsu

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

Diversification Opportunities for Air Transport and Komatsu

0.07

Correlation Coefficient

Air Transport  Komatsu

Significant diversification

The 3 months correlation between Air and Komatsu is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Komatsu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Komatsu 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 Komatsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Komatsu has no effect on the direction of Air Transport i.e., Air Transport and Komatsu go up and down completely randomly.

Pair Corralation between Air Transport and Komatsu

Assuming the 90 days horizon Air Transport Services is expected to under-perform the Komatsu. But the stock apears to be less risky and, when comparing its historical volatility, Air Transport Services is 2.9 times less risky than Komatsu. The stock trades about -0.07 of its potential returns per unit of risk. The Komatsu is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,555  in Komatsu on December 22, 2024 and sell it today you would earn a total of  266.00  from holding Komatsu or generate 10.41% return on investment over 90 days.

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

Air Transport Services  vs.  Komatsu

Air Transport Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Transport Services has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Komatsu

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Komatsu are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, Komatsu may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Air Transport and Komatsu

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

The idea behind Air Transport Services and Komatsu 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.