Correlation Between Air New and WW Grainger
Can any of the company-specific risk be diversified away by investing in both Air New and WW Grainger 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 WW Grainger 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 WW Grainger, you can compare the effects of market volatilities on Air New and WW Grainger 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 WW Grainger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and WW Grainger.
Diversification Opportunities for Air New and WW Grainger
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Air and GWW is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and WW Grainger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WW Grainger 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 WW Grainger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WW Grainger has no effect on the direction of Air New i.e., Air New and WW Grainger go up and down completely randomly.
Pair Corralation between Air New and WW Grainger
Assuming the 90 days trading horizon Air New Zealand is expected to generate 2.84 times more return on investment than WW Grainger. However, Air New is 2.84 times more volatile than WW Grainger. It trades about 0.15 of its potential returns per unit of risk. WW Grainger is currently generating about 0.15 per unit of risk. If you would invest 31.00 in Air New Zealand on October 20, 2024 and sell it today you would earn a total of 3.00 from holding Air New Zealand or generate 9.68% 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. WW Grainger
Performance |
| Timeline |
| Air New Zealand |
| WW Grainger |
Air New and WW Grainger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and WW Grainger
The main advantage of trading using opposite Air New and WW Grainger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, WW Grainger 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 WW Grainger will offset losses from the drop in WW Grainger's long position.| Air New vs. Molina Healthcare | Air New vs. STORE ELECTRONIC | Air New vs. STMICROELECTRONICS | Air New vs. ARROW ELECTRONICS |
| WW Grainger vs. AAC TECHNOLOGHLDGADR | WW Grainger vs. De Grey Mining | WW Grainger vs. ADRIATIC METALS LS 013355 | WW Grainger vs. Uber Technologies |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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