Correlation Between Air France and Air France-KLM

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

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

Diversification Opportunities for Air France and Air France-KLM

0.59

Correlation Coefficient

Air France  Air France-KLM

Very weak diversification

The 3 months correlation between Air and Air is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM 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 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 are associated (or correlated) with Air France-KLM. 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 Air France i.e., Air France and Air France-KLM go up and down completely randomly.

Pair Corralation between Air France and Air France-KLM

Assuming the 90 days horizon Air France KLM is expected to under-perform the Air France-KLM. But the pink sheet apears to be less risky and, when comparing its historical volatility, Air France KLM is 1.43 times less risky than Air France-KLM. The pink sheet trades about -0.33 of its potential returns per unit of risk. The Air France KLM SA is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  953.00  in Air France KLM SA on August 31, 2024 and sell it today you would lose (153.00) from holding Air France KLM SA or give up 16.05% of portfolio value over 90 days.

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

Air France KLM  vs.  Air France KLM SA

Air France KLM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air France KLM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 nearly stable basic indicators, Air France-KLM is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Air France and Air France-KLM

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

The idea behind Air France KLM 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.