Correlation Between Air France and ISPD Network

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

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

Diversification Opportunities for Air France and ISPD Network

-0.12

Correlation Coefficient

Air France  ISPD Network

Good diversification

The 3 months correlation between Air and ISPD is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA and ISPD Network SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISPD Network SA and Air France 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 Air France KLM SA are associated (or correlated) with ISPD Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISPD Network SA has no effect on the direction of Air France i.e., Air France and ISPD Network go up and down completely randomly.

Pair Corralation between Air France and ISPD Network

Assuming the 90 days horizon Air France KLM SA is expected to generate 1.23 times more return on investment than ISPD Network. However, Air France is 1.23 times more volatile than ISPD Network SA. It trades about -0.03 of its potential returns per unit of risk. ISPD Network SA is currently generating about -0.08 per unit of risk. If you would invest  827.00  in Air France KLM SA on September 13, 2024 and sell it today you would lose (61.00) from holding Air France KLM SA or give up 7.38% of portfolio value over 90 days.

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

Air France KLM SA  vs.  ISPD Network SA

Air France KLM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air France KLM SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Air France is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ISPD Network SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ISPD Network SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Air France and ISPD Network

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

The idea behind Air France KLM SA and ISPD Network 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.