Correlation Between Air New and Nova Eye
Can any of the company-specific risk be diversified away by investing in both Air New and Nova Eye 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 Nova Eye 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 Nova Eye Medical, you can compare the effects of market volatilities on Air New and Nova Eye 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 Nova Eye. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Nova Eye.
Diversification Opportunities for Air New and Nova Eye
Poor diversification
The 3 months correlation between Air and Nova is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Nova Eye Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Eye Medical 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 Nova Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Eye Medical has no effect on the direction of Air New i.e., Air New and Nova Eye go up and down completely randomly.
Pair Corralation between Air New and Nova Eye
Assuming the 90 days trading horizon Air New Zealand is expected to under-perform the Nova Eye. But the stock apears to be less risky and, when comparing its historical volatility, Air New Zealand is 4.55 times less risky than Nova Eye. The stock trades about -0.04 of its potential returns per unit of risk. The Nova Eye Medical is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 21.00 in Nova Eye Medical on August 25, 2024 and sell it today you would lose (6.00) from holding Nova Eye Medical or give up 28.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air New Zealand vs. Nova Eye Medical
Performance |
| Timeline |
| Air New Zealand |
| Nova Eye Medical |
Air New and Nova Eye Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Nova Eye
The main advantage of trading using opposite Air New and Nova Eye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Nova Eye 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 Nova Eye will offset losses from the drop in Nova Eye's long position.| Air New vs. Bio Gene Technology | Air New vs. Computershare | Air New vs. Hutchison Telecommunications | Air New vs. BTC Health Limited |
| Nova Eye vs. Strickland Metals | Nova Eye vs. Sky Metals | Nova Eye vs. Air New Zealand | Nova Eye vs. Home Consortium |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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