Correlation Between Air New and CITIC Telecom
Can any of the company-specific risk be diversified away by investing in both Air New and CITIC Telecom 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 CITIC Telecom 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 CITIC Telecom International, you can compare the effects of market volatilities on Air New and CITIC Telecom 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 CITIC Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and CITIC Telecom.
Diversification Opportunities for Air New and CITIC Telecom
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Air and CITIC is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and CITIC Telecom International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Telecom Intern 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 CITIC Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Telecom Intern has no effect on the direction of Air New i.e., Air New and CITIC Telecom go up and down completely randomly.
Pair Corralation between Air New and CITIC Telecom
Assuming the 90 days trading horizon Air New Zealand is expected to generate 0.61 times more return on investment than CITIC Telecom. However, Air New Zealand is 1.64 times less risky than CITIC Telecom. It trades about 0.14 of its potential returns per unit of risk. CITIC Telecom International is currently generating about 0.06 per unit of risk. If you would invest 32.00 in Air New Zealand on November 8, 2024 and sell it today you would earn a total of 2.00 from holding Air New Zealand or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air New Zealand vs. CITIC Telecom International
Performance |
| Timeline |
| Air New Zealand |
| CITIC Telecom Intern |
Air New and CITIC Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and CITIC Telecom
The main advantage of trading using opposite Air New and CITIC Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, CITIC Telecom 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 CITIC Telecom will offset losses from the drop in CITIC Telecom's long position.| Air New vs. AEON STORES | Air New vs. PICKN PAY STORES | Air New vs. SPARTAN STORES | Air New vs. CENTURIA OFFICE REIT |
| CITIC Telecom vs. Merit Medical Systems | CITIC Telecom vs. China Medical System | CITIC Telecom vs. CarsalesCom | CITIC Telecom vs. INTER CARS SA |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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