Correlation Between Aviation Links and Intel

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Can any of the company-specific risk be diversified away by investing in both Aviation Links and Intel 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 Aviation Links and Intel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aviation Links and Intel, you can compare the effects of market volatilities on Aviation Links and Intel 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 Aviation Links with a short position of Intel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aviation Links and Intel.

Diversification Opportunities for Aviation Links and Intel

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Aviation and Intel is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Aviation Links and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel and Aviation Links 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 Aviation Links are associated (or correlated) with Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of Aviation Links i.e., Aviation Links and Intel go up and down completely randomly.

Pair Corralation between Aviation Links and Intel

Assuming the 90 days trading horizon Aviation Links is expected to generate 1.98 times less return on investment than Intel. But when comparing it to its historical volatility, Aviation Links is 1.06 times less risky than Intel. It trades about 0.05 of its potential returns per unit of risk. Intel is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,199  in Intel on December 30, 2023 and sell it today you would earn a total of  218.00  from holding Intel or generate 5.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy81.82%
ValuesDaily Returns

Aviation Links  vs.  Intel

 Performance 
       Timeline  
Aviation Links 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Aviation Links are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aviation Links sustained solid returns over the last few months and may actually be approaching a breakup point.
Intel 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Intel is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Aviation Links and Intel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aviation Links and Intel

The main advantage of trading using opposite Aviation Links and Intel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aviation Links position performs unexpectedly, Intel 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 Intel will offset losses from the drop in Intel's long position.
The idea behind Aviation Links and Intel 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.
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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