Correlation Between Air New and Amazon
Can any of the company-specific risk be diversified away by investing in both Air New and Amazon 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 Amazon 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 Amazon Inc, you can compare the effects of market volatilities on Air New and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Amazon.
Diversification Opportunities for Air New and Amazon
Very weak diversification
The 3 months correlation between Air and Amazon is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Air New i.e., Air New and Amazon go up and down completely randomly.
Pair Corralation between Air New and Amazon
Assuming the 90 days trading horizon Air New Zealand is expected to under-perform the Amazon. But the stock apears to be less risky and, when comparing its historical volatility, Air New Zealand is 1.03 times less risky than Amazon. The stock trades about 0.0 of its potential returns per unit of risk. The Amazon Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 8,840 in Amazon Inc on October 11, 2024 and sell it today you would earn a total of 12,655 from holding Amazon Inc or generate 143.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air New Zealand vs. Amazon Inc
Performance |
| Timeline |
| Air New Zealand |
| Amazon Inc |
Air New and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Amazon
The main advantage of trading using opposite Air New and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| Air New vs. International Consolidated Airlines | Air New vs. American Airlines Group | Air New vs. Singapore Airlines Limited | Air New vs. Delta Electronics Public |
| Amazon vs. Delta Air Lines | Amazon vs. Advanced Medical Solutions | Amazon vs. Air New Zealand | Amazon vs. DELTA AIR LINES |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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