Can any of the company-specific risk be diversified away by investing in both Marlowe Plc and Air France-KLM 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 Marlowe Plc and Air France-KLM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marlowe plc and Air France KLM SA, you can compare the effects of market volatilities on Marlowe Plc and Air France-KLM 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 Marlowe Plc with a short position of Air France-KLM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marlowe Plc and Air France-KLM.
Diversification Opportunities for Marlowe Plc and Air France-KLM
The 3 months correlation between Marlowe and Air is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Marlowe plc and Air France KLM SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM and Marlowe Plc 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 Marlowe plc are associated (or correlated) with Air France-KLM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Marlowe Plc i.e., Marlowe Plc and Air France-KLM go up and down completely randomly.
Pair Corralation between Marlowe Plc and Air France-KLM
Assuming the 90 days horizon Marlowe Plc is expected to generate 3.77 times less return on investment than Air France-KLM. But when comparing it to its historical volatility, Marlowe plc is 1.24 times less risky than Air France-KLM. It trades about 0.02 of its potential returns per unit of risk. Air France KLM SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,062 in Air France KLM SA on March 6, 2024 and sell it today you would earn a total of 52.00 from holding Air France KLM SA or generate 4.9% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Marlowe plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Marlowe Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Compared to the overall equity markets, risk-adjusted returns on investments in Air France KLM SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Air France-KLM is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.