Correlation Between Air New and ALGOMA STEEL
Can any of the company-specific risk be diversified away by investing in both Air New and ALGOMA STEEL 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 ALGOMA STEEL 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 ALGOMA STEEL GROUP, you can compare the effects of market volatilities on Air New and ALGOMA STEEL 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 ALGOMA STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and ALGOMA STEEL.
Diversification Opportunities for Air New and ALGOMA STEEL
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Air and ALGOMA is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and ALGOMA STEEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALGOMA STEEL GROUP 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 ALGOMA STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALGOMA STEEL GROUP has no effect on the direction of Air New i.e., Air New and ALGOMA STEEL go up and down completely randomly.
Pair Corralation between Air New and ALGOMA STEEL
Assuming the 90 days trading horizon Air New is expected to generate 4.73 times less return on investment than ALGOMA STEEL. But when comparing it to its historical volatility, Air New Zealand is 1.6 times less risky than ALGOMA STEEL. It trades about 0.09 of its potential returns per unit of risk. ALGOMA STEEL GROUP is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 900.00 in ALGOMA STEEL GROUP on August 28, 2024 and sell it today you would earn a total of 160.00 from holding ALGOMA STEEL GROUP or generate 17.78% 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. ALGOMA STEEL GROUP
Performance |
| Timeline |
| Air New Zealand |
| ALGOMA STEEL GROUP |
Air New and ALGOMA STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and ALGOMA STEEL
The main advantage of trading using opposite Air New and ALGOMA STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, ALGOMA STEEL 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 ALGOMA STEEL will offset losses from the drop in ALGOMA STEEL's long position.| Air New vs. THRACE PLASTICS | Air New vs. Plastic Omnium | Air New vs. X FAB Silicon Foundries | Air New vs. MACOM Technology Solutions |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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