Correlation Between Transat AT and Chorus Aviation

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

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

Diversification Opportunities for Transat AT and Chorus Aviation

0.48

Correlation Coefficient

Transat AT  Chorus Aviation

Very weak diversification

The 3 months correlation between Transat and Chorus is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Transat AT and Chorus Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chorus Aviation 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 Chorus Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chorus Aviation has no effect on the direction of Transat AT i.e., Transat AT and Chorus Aviation go up and down completely randomly.

Pair Corralation between Transat AT and Chorus Aviation

Assuming the 90 days trading horizon Transat AT is expected to under-perform the Chorus Aviation. In addition to that, Transat AT is 1.09 times more volatile than Chorus Aviation. It trades about -0.06 of its total potential returns per unit of risk. Chorus Aviation is currently generating about 0.07 per unit of volatility. If you would invest  206.00  in Chorus Aviation on September 24, 2024 and sell it today you would earn a total of  88.00  from holding Chorus Aviation or generate 42.72% return on investment over 90 days.

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

Transat AT  vs.  Chorus Aviation

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.

Chorus Aviation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chorus Aviation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Chorus Aviation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Transat AT and Chorus Aviation

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

The idea behind Transat AT and Chorus Aviation 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.