Correlation Between Air New and Bridgestone
Can any of the company-specific risk be diversified away by investing in both Air New and Bridgestone 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 Bridgestone 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 Bridgestone, you can compare the effects of market volatilities on Air New and Bridgestone 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 Bridgestone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Bridgestone.
Diversification Opportunities for Air New and Bridgestone
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Air and Bridgestone is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Bridgestone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone 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 Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone has no effect on the direction of Air New i.e., Air New and Bridgestone go up and down completely randomly.
Pair Corralation between Air New and Bridgestone
Assuming the 90 days trading horizon Air New Zealand is expected to generate 1.26 times more return on investment than Bridgestone. However, Air New is 1.26 times more volatile than Bridgestone. It trades about 0.16 of its potential returns per unit of risk. Bridgestone is currently generating about 0.16 per unit of risk. If you would invest 32.00 in Air New Zealand on November 5, 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air New Zealand vs. Bridgestone
Performance |
| Timeline |
| Air New Zealand |
| Bridgestone |
Air New and Bridgestone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Bridgestone
The main advantage of trading using opposite Air New and Bridgestone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Bridgestone 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 Bridgestone will offset losses from the drop in Bridgestone's long position.| Air New vs. International Consolidated Airlines | Air New vs. SINGAPORE AIRLINES | Air New vs. Salesforce | Air New vs. SALESFORCE INC CDR |
| Bridgestone vs. ASURE SOFTWARE | Bridgestone vs. INTER CARS SA | Bridgestone vs. CyberArk Software | Bridgestone vs. PSI Software AG |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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