Correlation Between Air New and EROAD
Can any of the company-specific risk be diversified away by investing in both Air New and EROAD 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 EROAD 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 EROAD, you can compare the effects of market volatilities on Air New and EROAD 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 EROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and EROAD.
Diversification Opportunities for Air New and EROAD
Significant diversification
The 3 months correlation between Air and EROAD is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD 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 EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Air New i.e., Air New and EROAD go up and down completely randomly.
Pair Corralation between Air New and EROAD
Assuming the 90 days trading horizon Air New Zealand is expected to generate 0.56 times more return on investment than EROAD. However, Air New Zealand is 1.8 times less risky than EROAD. It trades about 0.25 of its potential returns per unit of risk. EROAD is currently generating about 0.09 per unit of risk. If you would invest 48.00 in Air New Zealand on September 15, 2024 and sell it today you would earn a total of 3.00 from holding Air New Zealand or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air New Zealand vs. EROAD
Performance |
| Timeline |
| Air New Zealand |
| EROAD |
Air New and EROAD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and EROAD
The main advantage of trading using opposite Air New and EROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, EROAD 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 EROAD will offset losses from the drop in EROAD's long position.| Air New vs. Dicker Data | Air New vs. Mirrabooka Investments | Air New vs. Australian Strategic Materials | Air New vs. Diversified United 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |