Correlation Between Air Transport and Hub

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

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

Diversification Opportunities for Air Transport and Hub

0.86

Correlation Coefficient

Air Transport  Hub

Very poor diversification

The 3 months correlation between Air and Hub is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Hub Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hub Group and Air Transport 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 Transport Services are associated (or correlated) with Hub. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hub Group has no effect on the direction of Air Transport i.e., Air Transport and Hub go up and down completely randomly.

Pair Corralation between Air Transport and Hub

Given the investment horizon of 90 days Air Transport Services is expected to generate 1.27 times more return on investment than Hub. However, Air Transport is 1.27 times more volatile than Hub Group. It trades about 0.03 of its potential returns per unit of risk. Hub Group is currently generating about -0.16 per unit of risk. If you would invest  1,247  in Air Transport Services on January 20, 2024 and sell it today you would earn a total of  14.00  from holding Air Transport Services or generate 1.12% return on investment over 90 days.

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

Air Transport Services  vs.  Hub Group

Air Transport Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Transport Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hub Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hub Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Air Transport and Hub

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

The idea behind Air Transport Services and Hub Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.