Correlation Between Cabot and Aegean Airlines

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

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

Diversification Opportunities for Cabot and Aegean Airlines

0.17

Correlation Coefficient

Cabot  Aegean Airlines

Average diversification

The 3 months correlation between Cabot and Aegean is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and Aegean Airlines SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegean Airlines SA and Cabot 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 Cabot are associated (or correlated) with Aegean Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegean Airlines SA has no effect on the direction of Cabot i.e., Cabot and Aegean Airlines go up and down completely randomly.

Pair Corralation between Cabot and Aegean Airlines

Considering the 90-day investment horizon Cabot is expected to generate 4.57 times less return on investment than Aegean Airlines. But when comparing it to its historical volatility, Cabot is 1.72 times less risky than Aegean Airlines. It trades about 0.11 of its potential returns per unit of risk. Aegean Airlines SA is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,249  in Aegean Airlines SA on March 7, 2024 and sell it today you would earn a total of  212.00  from holding Aegean Airlines SA or generate 16.97% return on investment over 90 days.

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

Cabot  vs.  Aegean Airlines SA

Cabot

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cabot are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, Cabot unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aegean Airlines SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aegean Airlines SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Aegean Airlines may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Cabot and Aegean Airlines

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

The idea behind Cabot and Aegean Airlines SA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.