Correlation Between Air New and EHEALTH
Can any of the company-specific risk be diversified away by investing in both Air New and EHEALTH 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 EHEALTH 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 EHEALTH, you can compare the effects of market volatilities on Air New and EHEALTH 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 EHEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and EHEALTH.
Diversification Opportunities for Air New and EHEALTH
Average diversification
The 3 months correlation between Air and EHEALTH is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and EHEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EHEALTH 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 EHEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EHEALTH has no effect on the direction of Air New i.e., Air New and EHEALTH go up and down completely randomly.
Pair Corralation between Air New and EHEALTH
Assuming the 90 days trading horizon Air New is expected to generate 1.55 times less return on investment than EHEALTH. But when comparing it to its historical volatility, Air New Zealand is 2.88 times less risky than EHEALTH. It trades about 0.18 of its potential returns per unit of risk. EHEALTH is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 456.00 in EHEALTH on September 2, 2024 and sell it today you would earn a total of 39.00 from holding EHEALTH or generate 8.55% 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. EHEALTH
Performance |
| Timeline |
| Air New Zealand |
| EHEALTH |
Air New and EHEALTH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and EHEALTH
The main advantage of trading using opposite Air New and EHEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, EHEALTH 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 EHEALTH will offset losses from the drop in EHEALTH's 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 |
| EHEALTH vs. SIVERS SEMICONDUCTORS AB | EHEALTH vs. Darden Restaurants | EHEALTH vs. Reliance Steel Aluminum | EHEALTH vs. Q2M Managementberatung 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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