Correlation Between Renoworks Software and Air Canada

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

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

Diversification Opportunities for Renoworks Software and Air Canada

0.9

Correlation Coefficient

Renoworks Software  Air Canada

Almost no diversification

The 3 months correlation between Renoworks and Air is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Renoworks Software and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada and Renoworks Software 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 Renoworks Software 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 Renoworks Software i.e., Renoworks Software and Air Canada go up and down completely randomly.

Pair Corralation between Renoworks Software and Air Canada

Given the investment horizon of 90 days Renoworks Software is expected to under-perform the Air Canada. But the stock apears to be less risky and, when comparing its historical volatility, Renoworks Software is 1.05 times less risky than Air Canada. The stock trades about -0.34 of its potential returns per unit of risk. The Air Canada is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  2,496  in Air Canada on September 30, 2024 and sell it today you would lose (253.00) from holding Air Canada or give up 10.14% of portfolio value over 90 days.

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

Renoworks Software  vs.  Air Canada

Renoworks Software

Risk-Adjusted Performance

12 of 100

Good

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

Air Canada

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 15 (%) 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 Renoworks Software and Air Canada

The main advantage of trading using opposite Renoworks Software and Air Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renoworks Software 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 Renoworks Software 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.