Correlation Between Air France and Singapore Airlines

Can any of the company-specific risk be diversified away by investing in both Air France and Singapore 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 Air France and Singapore Airlines 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 Singapore Airlines, you can compare the effects of market volatilities on Air France and Singapore 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 Air France with a short position of Singapore Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air France and Singapore Airlines.

Diversification Opportunities for Air France and Singapore Airlines

0.39

Correlation Coefficient

Air France  Singapore Airlines

Weak diversification

The 3 months correlation between Air and Singapore is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA and Singapore Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Airlines 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 Singapore Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Airlines has no effect on the direction of Air France i.e., Air France and Singapore Airlines go up and down completely randomly.

Pair Corralation between Air France and Singapore Airlines

Assuming the 90 days horizon Air France KLM SA is expected to generate 36.16 times more return on investment than Singapore Airlines. However, Air France is 36.16 times more volatile than Singapore Airlines. It trades about 0.14 of its potential returns per unit of risk. Singapore Airlines is currently generating about 0.03 per unit of risk. If you would invest  1,855  in Air France KLM SA on September 14, 2024 and sell it today you would lose (1,049) from holding Air France KLM SA or give up 56.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.91%
Values	Daily Returns

Air France KLM SA  vs.  Singapore Airlines

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 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Singapore Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Singapore Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Singapore Airlines 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 Singapore Airlines

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

The idea behind Air France KLM SA and Singapore Airlines 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 Stocks Directory module to find actively traded stocks across global markets.