Correlation Between ITALIAN WINE and Air Transport

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

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

Diversification Opportunities for ITALIAN WINE and Air Transport

0.39

Correlation Coefficient

ITALIAN WINE  Air Transport

Weak diversification

The 3 months correlation between ITALIAN and Air is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS 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 ITALIAN WINE 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 ITALIAN WINE BRANDS 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 ITALIAN WINE i.e., ITALIAN WINE and Air Transport go up and down completely randomly.

Pair Corralation between ITALIAN WINE and Air Transport

Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to under-perform the Air Transport. But the stock apears to be less risky and, when comparing its historical volatility, ITALIAN WINE BRANDS is 1.5 times less risky than Air Transport. The stock trades about -0.01 of its potential returns per unit of risk. The Air Transport Services is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,520  in Air Transport Services on October 4, 2024 and sell it today you would lose (420.00) from holding Air Transport Services or give up 16.67% of portfolio value over 90 days.

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

ITALIAN WINE BRANDS  vs.  Air Transport Services

ITALIAN WINE BRANDS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ITALIAN WINE BRANDS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ITALIAN WINE reported solid returns over the last few months and may actually be approaching a breakup point.

Air Transport Services

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITALIAN WINE and Air Transport

The main advantage of trading using opposite ITALIAN WINE and Air Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE 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 ITALIAN WINE BRANDS 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.