Correlation Between Air New and Ridley
Can any of the company-specific risk be diversified away by investing in both Air New and Ridley 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 Ridley 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 Ridley, you can compare the effects of market volatilities on Air New and Ridley 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 Ridley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Ridley.
Diversification Opportunities for Air New and Ridley
Weak diversification
The 3 months correlation between Air and Ridley is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Ridley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ridley 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 Ridley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ridley has no effect on the direction of Air New i.e., Air New and Ridley go up and down completely randomly.
Pair Corralation between Air New and Ridley
Assuming the 90 days trading horizon Air New Zealand is expected to generate 1.71 times more return on investment than Ridley. However, Air New is 1.71 times more volatile than Ridley. It trades about 0.07 of its potential returns per unit of risk. Ridley is currently generating about 0.03 per unit of risk. If you would invest 54.00 in Air New Zealand on October 25, 2024 and sell it today you would earn a total of 1.00 from holding Air New Zealand or generate 1.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air New Zealand vs. Ridley
Performance |
| Timeline |
| Air New Zealand |
| Ridley |
Air New and Ridley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Ridley
The main advantage of trading using opposite Air New and Ridley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Ridley 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 Ridley will offset losses from the drop in Ridley's long position.| Air New vs. Seven West Media | Air New vs. Viva Leisure | Air New vs. Dexus Convenience Retail | Air New vs. Sports Entertainment Group |
| Ridley vs. Kneomedia | Ridley vs. Nine Entertainment Co | Ridley vs. Global Health | Ridley vs. Austco Healthcare |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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