Correlation Between Air Canada and Exchange Income

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Can any of the company-specific risk be diversified away by investing in both Air Canada and Exchange Income 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 Canada and Exchange Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Exchange Income, you can compare the effects of market volatilities on Air Canada and Exchange Income 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 Canada with a short position of Exchange Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Exchange Income.

Diversification Opportunities for Air Canada and Exchange Income

0.97
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Air and Exchange is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Exchange Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Income and Air Canada 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 Canada are associated (or correlated) with Exchange Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Income has no effect on the direction of Air Canada i.e., Air Canada and Exchange Income go up and down completely randomly.

Pair Corralation between Air Canada and Exchange Income

Assuming the 90 days horizon Air Canada is expected to generate 2.57 times more return on investment than Exchange Income. However, Air Canada is 2.57 times more volatile than Exchange Income. It trades about 0.26 of its potential returns per unit of risk. Exchange Income is currently generating about 0.48 per unit of risk. If you would invest  1,387  in Air Canada on April 20, 2025 and sell it today you would earn a total of  712.00  from holding Air Canada or generate 51.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Air Canada  vs.  Exchange Income

 Performance 
       Timeline  
Air Canada 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 20 (%) 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.
Exchange Income 

Risk-Adjusted Performance

Very Strong

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Income are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Exchange Income displayed solid returns over the last few months and may actually be approaching a breakup point.

Air Canada and Exchange Income Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Air Canada and Exchange Income

The main advantage of trading using opposite Air Canada and Exchange Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Exchange Income 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 Exchange Income will offset losses from the drop in Exchange Income's long position.
The idea behind Air Canada and Exchange Income 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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