Correlation Between Australian Strategic and Air New
Can any of the company-specific risk be diversified away by investing in both Australian Strategic and Air New 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 Australian Strategic and Air New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Strategic Materials and Air New Zealand, you can compare the effects of market volatilities on Australian Strategic and Air New 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 Australian Strategic with a short position of Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Strategic and Air New.
Diversification Opportunities for Australian Strategic and Air New
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Australian and Air is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Australian Strategic Materials and Air New Zealand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air New Zealand and Australian Strategic 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 Australian Strategic Materials are associated (or correlated) with Air New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air New Zealand has no effect on the direction of Australian Strategic i.e., Australian Strategic and Air New go up and down completely randomly.
Pair Corralation between Australian Strategic and Air New
Assuming the 90 days trading horizon Australian Strategic Materials is expected to under-perform the Air New. In addition to that, Australian Strategic is 2.98 times more volatile than Air New Zealand. It trades about -0.04 of its total potential returns per unit of risk. Air New Zealand is currently generating about 0.25 per unit of volatility. 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Strategic Materials vs. Air New Zealand
Performance |
| Timeline |
| Australian Strategic |
| Air New Zealand |
Australian Strategic and Air New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Strategic and Air New
The main advantage of trading using opposite Australian Strategic and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Strategic position performs unexpectedly, Air New 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 New will offset losses from the drop in Air New's long position.| Australian Strategic vs. Northern Star Resources | Australian Strategic vs. Evolution Mining | Australian Strategic vs. Bluescope Steel | Australian Strategic vs. Sandfire Resources NL |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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