Correlation Between Western Investment and Air Canada

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

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

Diversification Opportunities for Western Investment and Air Canada

0.57

Correlation Coefficient

Western Investment  Air Canada

Very weak diversification

The 3 months correlation between Western and Air is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada and Western Investment 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 Western Investment 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 Western Investment i.e., Western Investment and Air Canada go up and down completely randomly.

Pair Corralation between Western Investment and Air Canada

Given the investment horizon of 90 days Western Investment is expected to generate 1.89 times less return on investment than Air Canada. In addition to that, Western Investment is 1.09 times more volatile than Air Canada. It trades about 0.07 of its total potential returns per unit of risk. Air Canada is currently generating about 0.15 per unit of volatility. If you would invest  1,479  in Air Canada on May 6, 2025 and sell it today you would earn a total of  427.00  from holding Air Canada or generate 28.87% return on investment over 90 days.

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

Western Investment  vs.  Air Canada

Western Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Western Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Air Canada

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Air Canada displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Investment and Air Canada

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

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.