Correlation Between Garmin and Air Transport

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

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

Diversification Opportunities for Garmin and Air Transport

0.62

Correlation Coefficient

Garmin  Air Transport

Poor diversification

The 3 months correlation between Garmin and Air is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Garmin and Air Transport Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Transport Services and Garmin 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 Garmin are associated (or correlated) with Air Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Transport Services has no effect on the direction of Garmin i.e., Garmin and Air Transport go up and down completely randomly.

Pair Corralation between Garmin and Air Transport

Given the investment horizon of 90 days Garmin is expected to generate 16.77 times more return on investment than Air Transport. However, Garmin is 16.77 times more volatile than Air Transport Services. It trades about 0.02 of its potential returns per unit of risk. Air Transport Services is currently generating about 0.24 per unit of risk. If you would invest  20,468  in Garmin on December 19, 2024 and sell it today you would earn a total of  336.00  from holding Garmin or generate 1.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Garmin  vs.  Air Transport Services

Garmin

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Garmin are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Garmin is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Air Transport Services

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 19 (%) 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.

Pair Trading with Garmin and Air Transport

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

The idea behind Garmin and Air Transport Services 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.