Correlation Between Highwood Asset and Air Canada

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

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

Diversification Opportunities for Highwood Asset and Air Canada

0.04

Correlation Coefficient

Highwood Asset  Air Canada

Significant diversification

The 3 months correlation between Highwood and Air is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Highwood Asset Management and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada and Highwood Asset 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 Highwood Asset Management are associated (or correlated) with Air Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Canada has no effect on the direction of Highwood Asset i.e., Highwood Asset and Air Canada go up and down completely randomly.

Pair Corralation between Highwood Asset and Air Canada

Assuming the 90 days horizon Highwood Asset Management is expected to under-perform the Air Canada. In addition to that, Highwood Asset is 2.0 times more volatile than Air Canada. It trades about -0.01 of its total potential returns per unit of risk. Air Canada is currently generating about 0.01 per unit of volatility. If you would invest  2,179  in Air Canada on October 11, 2024 and sell it today you would lose (6.00) from holding Air Canada or give up 0.28% of portfolio value over 90 days.

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

Highwood Asset Management  vs.  Air Canada

Highwood Asset Management

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Highwood Asset Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Highwood Asset is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Air Canada

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Air Canada displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Highwood Asset and Air Canada

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

The idea behind Highwood Asset Management and Air Canada 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.