Correlation Between Air New and Fair Isaac
Can any of the company-specific risk be diversified away by investing in both Air New and Fair Isaac 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 Fair Isaac 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 Fair Isaac Corp, you can compare the effects of market volatilities on Air New and Fair Isaac 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 Fair Isaac. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Fair Isaac.
Diversification Opportunities for Air New and Fair Isaac
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Air and Fair is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Fair Isaac Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac Corp 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 Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac Corp has no effect on the direction of Air New i.e., Air New and Fair Isaac go up and down completely randomly.
Pair Corralation between Air New and Fair Isaac
Assuming the 90 days trading horizon Air New is expected to generate 5.45 times less return on investment than Fair Isaac. But when comparing it to its historical volatility, Air New Zealand is 1.33 times less risky than Fair Isaac. It trades about 0.09 of its potential returns per unit of risk. Fair Isaac Corp is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 184,200 in Fair Isaac Corp on August 26, 2024 and sell it today you would earn a total of 40,600 from holding Fair Isaac Corp or generate 22.04% 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. Fair Isaac Corp
Performance |
| Timeline |
| Air New Zealand |
| Fair Isaac Corp |
Air New and Fair Isaac Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Fair Isaac
The main advantage of trading using opposite Air New and Fair Isaac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Fair Isaac 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 Fair Isaac will offset losses from the drop in Fair Isaac's long position.The idea behind Air New Zealand and Fair Isaac Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Channel module to use Commodity Channel Index to analyze current equity momentum.
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