Correlation Between Air New and Australian United
Can any of the company-specific risk be diversified away by investing in both Air New and Australian United 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 Air New and Australian United into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air New Zealand and Australian United Investment, you can compare the effects of market volatilities on Air New and Australian United 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 Air New with a short position of Australian United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Australian United.
Diversification Opportunities for Air New and Australian United
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Air and Australian is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Australian United Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian United and Air New 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 Air New Zealand are associated (or correlated) with Australian United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian United has no effect on the direction of Air New i.e., Air New and Australian United go up and down completely randomly.
Pair Corralation between Air New and Australian United
Assuming the 90 days trading horizon Air New Zealand is expected to generate 1.45 times more return on investment than Australian United. However, Air New is 1.45 times more volatile than Australian United Investment. It trades about 0.09 of its potential returns per unit of risk. Australian United Investment is currently generating about 0.06 per unit of risk. If you would invest 48.00 in Air New Zealand on August 27, 2024 and sell it today you would earn a total of 1.00 from holding Air New Zealand or generate 2.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air New Zealand vs. Australian United Investment
Performance |
| Timeline |
| Air New Zealand |
| Australian United |
Air New and Australian United Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Australian United
The main advantage of trading using opposite Air New and Australian United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Australian United 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 Australian United will offset losses from the drop in Australian United's long position.| Air New vs. Macquarie Group | Air New vs. Macquarie Group Ltd | Air New vs. Commonwealth Bank | Air New vs. Rio Tinto |
| Australian United vs. Diversified United Investment | Australian United vs. Air New Zealand | Australian United vs. Clime Investment Management | Australian United vs. Regal 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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