Correlation Between Exchange Income and Transat AT

Can any of the company-specific risk be diversified away by investing in both Exchange Income and Transat AT 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 Exchange Income and Transat AT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Exchange Income and Transat AT, you can compare the effects of market volatilities on Exchange Income and Transat AT 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 Exchange Income with a short position of Transat AT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exchange Income and Transat AT.

Diversification Opportunities for Exchange Income and Transat AT

0.42

Correlation Coefficient

Exchange Income  Transat AT

Very weak diversification

The 3 months correlation between Exchange and Transat is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Income and Transat AT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transat AT and Exchange Income 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 Exchange Income are associated (or correlated) with Transat AT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transat AT has no effect on the direction of Exchange Income i.e., Exchange Income and Transat AT go up and down completely randomly.

Pair Corralation between Exchange Income and Transat AT

Assuming the 90 days trading horizon Exchange Income is expected to generate 0.54 times more return on investment than Transat AT. However, Exchange Income is 1.87 times less risky than Transat AT. It trades about 0.03 of its potential returns per unit of risk. Transat AT is currently generating about -0.04 per unit of risk. If you would invest  4,882  in Exchange Income on October 12, 2024 and sell it today you would earn a total of  764.00  from holding Exchange Income or generate 15.65% return on investment over 90 days.

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

Exchange Income  vs.  Transat AT

Exchange Income

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Income are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Exchange Income is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Transat AT

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transat AT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Transat AT may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Exchange Income and Transat AT

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

The idea behind Exchange Income and Transat AT 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.