Correlation Between Air Transport and International Consolidated

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

By analyzing existing cross correlation between Air Transport Services and International Consolidated Airlines, you can compare the effects of market volatilities on Air Transport and International Consolidated 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 Transport with a short position of International Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and International Consolidated.

Diversification Opportunities for Air Transport and International Consolidated

0.81

Correlation Coefficient

Air Transport  International Consolidated

Very poor diversification

The 3 months correlation between Air and International is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated and Air Transport 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 Transport Services are associated (or correlated) with International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Air Transport i.e., Air Transport and International Consolidated go up and down completely randomly.

Pair Corralation between Air Transport and International Consolidated

Given the investment horizon of 90 days Air Transport Services is expected to generate 2.19 times more return on investment than International Consolidated. However, Air Transport is 2.19 times more volatile than International Consolidated Airlines. It trades about 0.15 of its potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.3 per unit of risk. If you would invest  1,569  in Air Transport Services on August 31, 2024 and sell it today you would earn a total of  630.00  from holding Air Transport Services or generate 40.15% return on investment over 90 days.

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

Air Transport Services  vs.  International Consolidated Air

Air Transport Services

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

International Consolidated

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, International Consolidated showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Transport and International Consolidated

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

The idea behind Air Transport Services and International Consolidated 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.