Correlation Between Russel Metals and Air Canada

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

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

Diversification Opportunities for Russel Metals and Air Canada

-0.41

Correlation Coefficient

Russel Metals  Air Canada

Very good diversification

The 3 months correlation between Russel and Air is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Russel Metals and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada and Russel Metals 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 Russel Metals 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 Russel Metals i.e., Russel Metals and Air Canada go up and down completely randomly.

Pair Corralation between Russel Metals and Air Canada

Assuming the 90 days trading horizon Russel Metals is expected to generate 0.84 times more return on investment than Air Canada. However, Russel Metals is 1.19 times less risky than Air Canada. It trades about 0.04 of its potential returns per unit of risk. Air Canada is currently generating about -0.01 per unit of risk. If you would invest  2,921  in Russel Metals on February 16, 2024 and sell it today you would earn a total of  970.00  from holding Russel Metals or generate 33.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Russel Metals  vs.  Air Canada

Russel Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Russel Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Air Canada

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Air Canada is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Russel Metals and Air Canada

The main advantage of trading using opposite Russel Metals and Air Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russel Metals 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.

The idea behind Russel Metals and Air Canada 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.