Correlation Between Volaris and Air France

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

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

Diversification Opportunities for Volaris and Air France

-0.87

Correlation Coefficient

Volaris  Air France

Pay attention - limited upside

The 3 months correlation between Volaris and Air is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Volaris and Air France KLM SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM and Volaris 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 Volaris are associated (or correlated) with Air France. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Volaris i.e., Volaris and Air France go up and down completely randomly.

Pair Corralation between Volaris and Air France

Given the investment horizon of 90 days Volaris is expected to under-perform the Air France. But the stock apears to be less risky and, when comparing its historical volatility, Volaris is 1.81 times less risky than Air France. The stock trades about -0.13 of its potential returns per unit of risk. The Air France KLM SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  825.00  in Air France KLM SA on December 28, 2024 and sell it today you would earn a total of  264.00  from holding Air France KLM SA or generate 32.0% return on investment over 90 days.

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

Volaris  vs.  Air France KLM SA

Volaris

Risk-Adjusted Performance

Very Weak

Over the last 90 days Volaris has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Air France KLM

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air France KLM SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air France reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volaris and Air France

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

The idea behind Volaris and Air France KLM SA 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.