Correlation Between Air Transport and Gossan Resources

Can any of the company-specific risk be diversified away by investing in both Air Transport and Gossan Resources 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 Gossan Resources 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 Gossan Resources, you can compare the effects of market volatilities on Air Transport and Gossan Resources 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 Gossan Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Gossan Resources.

Diversification Opportunities for Air Transport and Gossan Resources

0.58

Correlation Coefficient

Air Transport  Gossan Resources

Very weak diversification

The 3 months correlation between Air and Gossan is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Gossan Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gossan Resources 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 Gossan Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gossan Resources has no effect on the direction of Air Transport i.e., Air Transport and Gossan Resources go up and down completely randomly.

Pair Corralation between Air Transport and Gossan Resources

Assuming the 90 days horizon Air Transport is expected to generate 19.88 times less return on investment than Gossan Resources. But when comparing it to its historical volatility, Air Transport Services is 27.88 times less risky than Gossan Resources. It trades about 0.15 of its potential returns per unit of risk. Gossan Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2.20  in Gossan Resources on September 15, 2024 and sell it today you would lose (1.10) from holding Gossan Resources or give up 50.0% of portfolio value over 90 days.

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

Air Transport Services  vs.  Gossan Resources

Air Transport Services

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Gossan Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gossan Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gossan Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Transport and Gossan Resources

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

The idea behind Air Transport Services and Gossan Resources 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.