Correlation Between Carmat SA and Air Canada

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

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

Diversification Opportunities for Carmat SA and Air Canada

-0.73

Correlation Coefficient

Carmat SA  Air Canada

Pay attention - limited upside

The 3 months correlation between Carmat and Air is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Carmat SA and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada and Carmat SA 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 Carmat SA 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 Carmat SA i.e., Carmat SA and Air Canada go up and down completely randomly.

Pair Corralation between Carmat SA and Air Canada

Assuming the 90 days horizon Carmat SA is expected to generate 1.97 times more return on investment than Air Canada. However, Carmat SA is 1.97 times more volatile than Air Canada. It trades about -0.11 of its potential returns per unit of risk. Air Canada is currently generating about -0.22 per unit of risk. If you would invest  112.00  in Carmat SA on September 22, 2024 and sell it today you would lose (14.00) from holding Carmat SA or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Carmat SA  vs.  Air Canada

Carmat SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carmat SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Air Canada

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Air Canada unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carmat SA and Air Canada

The main advantage of trading using opposite Carmat SA and Air Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carmat SA 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 Carmat SA 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.

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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.