Correlation Between Watsco and Aegean Airlines

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

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

Diversification Opportunities for Watsco and Aegean Airlines

-0.71

Correlation Coefficient

Watsco  Aegean Airlines

Pay attention - limited upside

The 3 months correlation between Watsco and Aegean is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Watsco Inc and Aegean Airlines SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegean Airlines SA and Watsco 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 Watsco Inc are associated (or correlated) with Aegean Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegean Airlines SA has no effect on the direction of Watsco i.e., Watsco and Aegean Airlines go up and down completely randomly.

Pair Corralation between Watsco and Aegean Airlines

Considering the 90-day investment horizon Watsco is expected to generate 1.05 times less return on investment than Aegean Airlines. But when comparing it to its historical volatility, Watsco Inc is 1.31 times less risky than Aegean Airlines. It trades about 0.09 of its potential returns per unit of risk. Aegean Airlines SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  512.00  in Aegean Airlines SA on September 24, 2024 and sell it today you would earn a total of  513.00  from holding Aegean Airlines SA or generate 100.2% return on investment over 90 days.

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

Watsco Inc  vs.  Aegean Airlines SA

Watsco Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Watsco Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Watsco is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Aegean Airlines SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegean Airlines SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Watsco and Aegean Airlines

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

The idea behind Watsco Inc and Aegean Airlines 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.