Correlation Between TFI International and Air Canada

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

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

Diversification Opportunities for TFI International and Air Canada

0.84

Correlation Coefficient

TFI International  Air Canada

Very poor diversification

The 3 months correlation between TFI and Air is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding TFI International and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada and TFI International 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 TFI International 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 TFI International i.e., TFI International and Air Canada go up and down completely randomly.

Pair Corralation between TFI International and Air Canada

Assuming the 90 days trading horizon TFI International is expected to generate 0.5 times more return on investment than Air Canada. However, TFI International is 2.0 times less risky than Air Canada. It trades about -0.19 of its potential returns per unit of risk. Air Canada is currently generating about -0.22 per unit of risk. If you would invest  20,936  in TFI International on September 24, 2024 and sell it today you would lose (1,042) from holding TFI International or give up 4.98% of portfolio value over 90 days.

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

TFI International  vs.  Air Canada

TFI International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TFI International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Air Canada

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 13 (%) 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 TFI International and Air Canada

The main advantage of trading using opposite TFI International and Air Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFI International 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 TFI International 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.