Correlation Between Air New and Pioneer Credit
Can any of the company-specific risk be diversified away by investing in both Air New and Pioneer Credit 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 Pioneer Credit 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 Pioneer Credit, you can compare the effects of market volatilities on Air New and Pioneer Credit 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 Pioneer Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Pioneer Credit.
Diversification Opportunities for Air New and Pioneer Credit
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Air and Pioneer is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Pioneer Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Credit 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 Pioneer Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Credit has no effect on the direction of Air New i.e., Air New and Pioneer Credit go up and down completely randomly.
Pair Corralation between Air New and Pioneer Credit
Assuming the 90 days trading horizon Air New is expected to generate 1.04 times less return on investment than Pioneer Credit. But when comparing it to its historical volatility, Air New Zealand is 2.63 times less risky than Pioneer Credit. It trades about 0.15 of its potential returns per unit of risk. Pioneer Credit is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 61.00 in Pioneer Credit on August 29, 2024 and sell it today you would earn a total of 2.00 from holding Pioneer Credit or generate 3.28% 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. Pioneer Credit
Performance |
| Timeline |
| Air New Zealand |
| Pioneer Credit |
Air New and Pioneer Credit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Pioneer Credit
The main advantage of trading using opposite Air New and Pioneer Credit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Pioneer Credit 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 Pioneer Credit will offset losses from the drop in Pioneer Credit's long position.| Air New vs. Aneka Tambang Tbk | Air New vs. ANZ Group Holdings | Air New vs. Australia and New | Air New vs. Commonwealth Bank |
| Pioneer Credit vs. Champion Iron | Pioneer Credit vs. Ridley | Pioneer Credit vs. Peel Mining | Pioneer Credit 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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