Correlation Between Air New and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both Air New and Algonquin Power 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 Algonquin Power 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 Algonquin Power Utilities, you can compare the effects of market volatilities on Air New and Algonquin Power 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 Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Algonquin Power.
Diversification Opportunities for Air New and Algonquin Power
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Air and Algonquin is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities 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 Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of Air New i.e., Air New and Algonquin Power go up and down completely randomly.
Pair Corralation between Air New and Algonquin Power
Assuming the 90 days trading horizon Air New Zealand is expected to generate 0.99 times more return on investment than Algonquin Power. However, Air New Zealand is 1.01 times less risky than Algonquin Power. It trades about 0.07 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.08 per unit of risk. If you would invest 29.00 in Air New Zealand on November 3, 2024 and sell it today you would earn a total of 5.00 from holding Air New Zealand or generate 17.24% 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. Algonquin Power Utilities
Performance |
| Timeline |
| Air New Zealand |
| Algonquin Power Utilities |
Air New and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Algonquin Power
The main advantage of trading using opposite Air New and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Algonquin Power 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.| Air New vs. National Retail Properties | Air New vs. CARSALESCOM | Air New vs. H2O Retailing | Air New vs. TRADEGATE |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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