Correlation Between Power and Air Canada
Can any of the company-specific risk be diversified away by investing in both Power 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 Power and Air Canada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power and Air Canada, you can compare the effects of market volatilities on Power 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 Power with a short position of Air Canada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power and Air Canada.
Diversification Opportunities for Power and Air Canada
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Power and Air is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Power and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada and Power 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 Power 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 Power i.e., Power and Air Canada go up and down completely randomly.
Pair Corralation between Power and Air Canada
Assuming the 90 days trading horizon Power is expected to generate 5.11 times less return on investment than Air Canada. But when comparing it to its historical volatility, Power is 2.31 times less risky than Air Canada. It trades about 0.12 of its potential returns per unit of risk. Air Canada is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,434 in Air Canada on April 24, 2025 and sell it today you would earn a total of 724.00 from holding Air Canada or generate 50.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Power vs. Air Canada
Performance |
Timeline |
Power |
Air Canada |
Power and Air Canada Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Power and Air Canada
The main advantage of trading using opposite Power and Air Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power 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.Power vs. Great West Lifeco | Power vs. Manulife Financial Corp | Power vs. Sun Life Financial | Power vs. Fortis Inc |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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