Correlation Between Transat AT and Cineplex

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

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

Diversification Opportunities for Transat AT and Cineplex

0.65

Correlation Coefficient

Transat AT  Cineplex

Poor diversification

The 3 months correlation between Transat and Cineplex is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Transat AT and Cineplex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cineplex and Transat AT 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 Transat AT are associated (or correlated) with Cineplex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cineplex has no effect on the direction of Transat AT i.e., Transat AT and Cineplex go up and down completely randomly.

Pair Corralation between Transat AT and Cineplex

Assuming the 90 days trading horizon Transat AT is expected to generate 4.29 times less return on investment than Cineplex. In addition to that, Transat AT is 1.63 times more volatile than Cineplex. It trades about 0.06 of its total potential returns per unit of risk. Cineplex is currently generating about 0.39 per unit of volatility. If you would invest  1,055  in Cineplex on September 24, 2024 and sell it today you would earn a total of  180.00  from holding Cineplex or generate 17.06% return on investment over 90 days.

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

Transat AT  vs.  Cineplex

Transat AT

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transat AT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Transat AT is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Cineplex

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cineplex are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Cineplex displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transat AT and Cineplex

The main advantage of trading using opposite Transat AT and Cineplex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transat AT position performs unexpectedly, Cineplex 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 Cineplex will offset losses from the drop in Cineplex's long position.

The idea behind Transat AT and Cineplex 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 Stocks Directory module to find actively traded stocks across global markets.