Correlation Between Clarke and Air Canada

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

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

Diversification Opportunities for Clarke and Air Canada

-0.82

Correlation Coefficient

Clarke  Air Canada

Pay attention - limited upside

The 3 months correlation between Clarke and Air is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Clarke Inc and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada and Clarke 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 Clarke Inc are associated (or correlated) with Air Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Canada has no effect on the direction of Clarke i.e., Clarke and Air Canada go up and down completely randomly.

Pair Corralation between Clarke and Air Canada

Assuming the 90 days trading horizon Clarke Inc is expected to under-perform the Air Canada. But the stock apears to be less risky and, when comparing its historical volatility, Clarke Inc is 10.9 times less risky than Air Canada. The stock trades about -0.09 of its potential returns per unit of risk. The Air Canada is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,639  in Air Canada on September 30, 2024 and sell it today you would earn a total of  604.00  from holding Air Canada or generate 36.85% return on investment over 90 days.

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

Clarke Inc  vs.  Air Canada

Clarke Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clarke Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Clarke is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Air Canada

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Air Canada displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clarke and Air Canada

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

The idea behind Clarke Inc and Air Canada 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.