Correlation Between Transat AT and Exchange Income

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

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

Diversification Opportunities for Transat AT and Exchange Income

0.49

Correlation Coefficient

Transat AT  Exchange Income

Very weak diversification

The 3 months correlation between Transat and Exchange is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Transat AT and Exchange Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Income 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 Exchange Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Income has no effect on the direction of Transat AT i.e., Transat AT and Exchange Income go up and down completely randomly.

Pair Corralation between Transat AT and Exchange Income

Assuming the 90 days trading horizon Transat AT is expected to generate 3.82 times more return on investment than Exchange Income. However, Transat AT is 3.82 times more volatile than Exchange Income. It trades about 0.06 of its potential returns per unit of risk. Exchange Income is currently generating about 0.0 per unit of risk. If you would invest  178.00  in Transat AT on September 24, 2024 and sell it today you would earn a total of  5.00  from holding Transat AT or generate 2.81% 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.  Exchange Income

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.

Exchange Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Income are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Exchange Income may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Transat AT and Exchange Income

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

The idea behind Transat AT and Exchange Income 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.