Correlation Between Lycos Energy and Air Canada

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

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

Diversification Opportunities for Lycos Energy and Air Canada

-0.56

Correlation Coefficient

Lycos Energy  Air Canada

Excellent diversification

The 3 months correlation between Lycos and Air is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Lycos Energy and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada and Lycos Energy 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 Lycos Energy 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 Lycos Energy i.e., Lycos Energy and Air Canada go up and down completely randomly.

Pair Corralation between Lycos Energy and Air Canada

Assuming the 90 days horizon Lycos Energy is expected to generate 21.24 times less return on investment than Air Canada. In addition to that, Lycos Energy is 1.25 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 0.31 per unit of volatility. If you would invest  1,585  in Air Canada on September 13, 2024 and sell it today you would earn a total of  920.00  from holding Air Canada or generate 58.04% return on investment over 90 days.

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

Lycos Energy  vs.  Air Canada

Lycos Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Air Canada displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lycos Energy and Air Canada

The main advantage of trading using opposite Lycos Energy and Air Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lycos Energy 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 Lycos Energy 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.