Correlation Between Auckland International and Saker Aviation
Can any of the company-specific risk be diversified away by investing in both Auckland International and Saker Aviation 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 Auckland International and Saker Aviation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auckland International Airport and Saker Aviation Services, you can compare the effects of market volatilities on Auckland International and Saker Aviation 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 Auckland International with a short position of Saker Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auckland International and Saker Aviation.
Diversification Opportunities for Auckland International and Saker Aviation
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Auckland and Saker is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Auckland International Airport and Saker Aviation Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saker Aviation Services and Auckland International 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 Auckland International Airport are associated (or correlated) with Saker Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saker Aviation Services has no effect on the direction of Auckland International i.e., Auckland International and Saker Aviation go up and down completely randomly.
Pair Corralation between Auckland International and Saker Aviation
Assuming the 90 days horizon Auckland International Airport is expected to generate 0.47 times more return on investment than Saker Aviation. However, Auckland International Airport is 2.12 times less risky than Saker Aviation. It trades about -0.1 of its potential returns per unit of risk. Saker Aviation Services is currently generating about -0.1 per unit of risk. If you would invest 453.00 in Auckland International Airport on August 29, 2024 and sell it today you would lose (44.00) from holding Auckland International Airport or give up 9.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auckland International Airport vs. Saker Aviation Services
Performance |
| Timeline |
| Auckland International |
| Saker Aviation Services |
Auckland International and Saker Aviation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auckland International and Saker Aviation
The main advantage of trading using opposite Auckland International and Saker Aviation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auckland International position performs unexpectedly, Saker Aviation 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 Saker Aviation will offset losses from the drop in Saker Aviation's long position.The idea behind Auckland International Airport and Saker Aviation Services 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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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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