Correlation Between Australian Dairy and Air New
Can any of the company-specific risk be diversified away by investing in both Australian Dairy and Air New 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 Australian Dairy and Air New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Dairy Farms and Air New Zealand, you can compare the effects of market volatilities on Australian Dairy and Air New 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 Australian Dairy with a short position of Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Dairy and Air New.
Diversification Opportunities for Australian Dairy and Air New
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Australian and Air is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Australian Dairy Farms and Air New Zealand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air New Zealand and Australian Dairy 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 Australian Dairy Farms are associated (or correlated) with Air New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air New Zealand has no effect on the direction of Australian Dairy i.e., Australian Dairy and Air New go up and down completely randomly.
Pair Corralation between Australian Dairy and Air New
Assuming the 90 days trading horizon Australian Dairy Farms is expected to generate 4.61 times more return on investment than Air New. However, Australian Dairy is 4.61 times more volatile than Air New Zealand. It trades about 0.03 of its potential returns per unit of risk. Air New Zealand is currently generating about -0.02 per unit of risk. If you would invest 4.50 in Australian Dairy Farms on September 14, 2024 and sell it today you would earn a total of 0.40 from holding Australian Dairy Farms or generate 8.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Dairy Farms vs. Air New Zealand
Performance |
| Timeline |
| Australian Dairy Farms |
| Air New Zealand |
Australian Dairy and Air New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Dairy and Air New
The main advantage of trading using opposite Australian Dairy and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Dairy position performs unexpectedly, Air New 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 New will offset losses from the drop in Air New's long position.| Australian Dairy vs. Aneka Tambang Tbk | Australian Dairy vs. Commonwealth Bank | Australian Dairy vs. Commonwealth Bank of | Australian Dairy vs. Australia and New |
| Air New vs. Ecofibre | Air New vs. iShares Global Healthcare | Air New vs. Adriatic Metals Plc | Air New vs. Australian Dairy Farms |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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