Correlation Between ISign Media and Air Canada

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

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

Diversification Opportunities for ISign Media and Air Canada

-0.05

Correlation Coefficient

ISign Media  Air Canada

Good diversification

The 3 months correlation between ISign and Air is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding iSign Media Solutions and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada and ISign Media 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 iSign Media Solutions 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 ISign Media i.e., ISign Media and Air Canada go up and down completely randomly.

Pair Corralation between ISign Media and Air Canada

Assuming the 90 days horizon iSign Media Solutions is expected to generate 24.8 times more return on investment than Air Canada. However, ISign Media is 24.8 times more volatile than Air Canada. It trades about 0.07 of its potential returns per unit of risk. Air Canada is currently generating about 0.01 per unit of risk. If you would invest  1.00  in iSign Media Solutions on September 27, 2024 and sell it today you would earn a total of  1,392  from holding iSign Media Solutions or generate 139200.0% return on investment over 90 days.

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

iSign Media Solutions  vs.  Air Canada

iSign Media Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iSign Media Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ISign Media 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

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 14 (%) 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 ISign Media and Air Canada

The main advantage of trading using opposite ISign Media and Air Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ISign Media 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 iSign Media Solutions 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.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.