Correlation Between Air New and Gossan Resources
Can any of the company-specific risk be diversified away by investing in both Air New and Gossan Resources 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 Gossan Resources 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 Gossan Resources, you can compare the effects of market volatilities on Air New and Gossan Resources 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 Gossan Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Gossan Resources.
Diversification Opportunities for Air New and Gossan Resources
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Air and Gossan is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Gossan Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gossan Resources 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 Gossan Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gossan Resources has no effect on the direction of Air New i.e., Air New and Gossan Resources go up and down completely randomly.
Pair Corralation between Air New and Gossan Resources
Assuming the 90 days trading horizon Air New is expected to generate 604.56 times less return on investment than Gossan Resources. But when comparing it to its historical volatility, Air New Zealand is 29.32 times less risky than Gossan Resources. It trades about 0.01 of its potential returns per unit of risk. Gossan Resources is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 0.40 in Gossan Resources on November 27, 2024 and sell it today you would earn a total of 0.35 from holding Gossan Resources or generate 87.5% 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. Gossan Resources
Performance |
| Timeline |
| Air New Zealand |
| Gossan Resources |
Air New and Gossan Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Gossan Resources
The main advantage of trading using opposite Air New and Gossan Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Gossan Resources 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 Gossan Resources will offset losses from the drop in Gossan Resources' long position.| Air New vs. APPLIED MATERIALS | Air New vs. Applied Materials | Air New vs. Mitsubishi Materials | Air New vs. Rayonier Advanced Materials |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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