Correlation Between Air New and Novanta
Can any of the company-specific risk be diversified away by investing in both Air New and Novanta 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 Novanta 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 Novanta, you can compare the effects of market volatilities on Air New and Novanta 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 Novanta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Novanta.
Diversification Opportunities for Air New and Novanta
Good diversification
The 3 months correlation between Air and Novanta is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Novanta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novanta 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 Novanta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novanta has no effect on the direction of Air New i.e., Air New and Novanta go up and down completely randomly.
Pair Corralation between Air New and Novanta
Assuming the 90 days trading horizon Air New Zealand is expected to under-perform the Novanta. But the stock apears to be less risky and, when comparing its historical volatility, Air New Zealand is 1.28 times less risky than Novanta. The stock trades about -0.01 of its potential returns per unit of risk. The Novanta is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 12,900 in Novanta on September 14, 2024 and sell it today you would earn a total of 2,800 from holding Novanta or generate 21.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air New Zealand vs. Novanta
Performance |
| Timeline |
| Air New Zealand |
| Novanta |
Air New and Novanta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Novanta
The main advantage of trading using opposite Air New and Novanta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Novanta 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 Novanta will offset losses from the drop in Novanta's long position.The idea behind Air New Zealand and Novanta pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Novanta vs. INVITATION HOMES DL | Novanta vs. DELTA AIR LINES | Novanta vs. Altair Engineering | Novanta vs. Air New Zealand |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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