Correlation Between Air New and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both Air New and Spirent Communications 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 Spirent Communications 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 Spirent Communications plc, you can compare the effects of market volatilities on Air New and Spirent Communications 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 Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Spirent Communications.
Diversification Opportunities for Air New and Spirent Communications
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Air and Spirent is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications 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 Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Air New i.e., Air New and Spirent Communications go up and down completely randomly.
Pair Corralation between Air New and Spirent Communications
Assuming the 90 days trading horizon Air New Zealand is expected to generate 1.84 times more return on investment than Spirent Communications. However, Air New is 1.84 times more volatile than Spirent Communications plc. It trades about 0.18 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.19 per unit of risk. If you would invest 29.00 in Air New Zealand on September 2, 2024 and sell it today you would earn a total of 2.00 from holding Air New Zealand or generate 6.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air New Zealand vs. Spirent Communications plc
Performance |
| Timeline |
| Air New Zealand |
| Spirent Communications |
Air New and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Spirent Communications
The main advantage of trading using opposite Air New and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Spirent Communications 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 Spirent Communications will offset losses from the drop in Spirent Communications' long position.| Air New vs. SIVERS SEMICONDUCTORS AB | Air New vs. Darden Restaurants | Air New vs. Reliance Steel Aluminum | Air New vs. Q2M Managementberatung AG |
| Spirent Communications vs. Deutsche Telekom AG | Spirent Communications vs. Superior Plus Corp | Spirent Communications vs. NMI Holdings | Spirent Communications vs. Origin Agritech |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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