Correlation Between Air New and Yokohama Rubber
Can any of the company-specific risk be diversified away by investing in both Air New and Yokohama Rubber 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 Yokohama Rubber 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 The Yokohama Rubber, you can compare the effects of market volatilities on Air New and Yokohama Rubber 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 Yokohama Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Yokohama Rubber.
Diversification Opportunities for Air New and Yokohama Rubber
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Air and Yokohama is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber 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 Yokohama Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokohama Rubber has no effect on the direction of Air New i.e., Air New and Yokohama Rubber go up and down completely randomly.
Pair Corralation between Air New and Yokohama Rubber
Assuming the 90 days trading horizon Air New Zealand is expected to generate 1.56 times more return on investment than Yokohama Rubber. However, Air New is 1.56 times more volatile than The Yokohama Rubber. It trades about 0.14 of its potential returns per unit of risk. The Yokohama Rubber is currently generating about 0.17 per unit of risk. If you would invest 32.00 in Air New Zealand on November 8, 2024 and sell it today you would earn a total of 2.00 from holding Air New Zealand or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air New Zealand vs. The Yokohama Rubber
Performance |
| Timeline |
| Air New Zealand |
| Yokohama Rubber |
Air New and Yokohama Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Yokohama Rubber
The main advantage of trading using opposite Air New and Yokohama Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Yokohama Rubber 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 Yokohama Rubber will offset losses from the drop in Yokohama Rubber's long position.| Air New vs. United Insurance Holdings | Air New vs. Adtalem Global Education | Air New vs. CAREER EDUCATION | Air New vs. CullenFrost Bankers |
| Yokohama Rubber vs. Apple Inc | Yokohama Rubber vs. Apple Inc | Yokohama Rubber vs. Apple Inc | Yokohama Rubber vs. Apple Inc |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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