Correlation Between Air New and Air China
Can any of the company-specific risk be diversified away by investing in both Air New and Air China 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 Air China 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 Air China Limited, you can compare the effects of market volatilities on Air New and Air China 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 Air China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Air China.
Diversification Opportunities for Air New and Air China
Modest diversification
The 3 months correlation between Air and Air is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Air China Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China Limited 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 Air China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air China Limited has no effect on the direction of Air New i.e., Air New and Air China go up and down completely randomly.
Pair Corralation between Air New and Air China
Assuming the 90 days horizon Air New Zealand is expected to generate 3.26 times more return on investment than Air China. However, Air New is 3.26 times more volatile than Air China Limited. It trades about 0.15 of its potential returns per unit of risk. Air China Limited is currently generating about -0.23 per unit of risk. If you would invest 32.00 in Air New Zealand on October 20, 2024 and sell it today you would earn a total of 2.00 from holding Air New Zealand or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air New Zealand vs. Air China Limited
Performance |
| Timeline |
| Air New Zealand |
| Air China Limited |
Air New and Air China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Air China
The main advantage of trading using opposite Air New and Air China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Air China 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 Air China will offset losses from the drop in Air China's long position.| Air New vs. AirAsia Group Berhad | Air New vs. ANA Holdings ADR | Air New vs. Air France KLM SA | Air New vs. Cebu Air |
| Air China vs. Cebu Air | Air China vs. Finnair Oyj | Air China vs. easyJet plc | Air China vs. Norse Atlantic ASA |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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