Correlation Between Canadian Utilities and Air New
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and Air New 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 Canadian Utilities and Air New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and Air New Zealand, you can compare the effects of market volatilities on Canadian Utilities and Air New 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 Canadian Utilities with a short position of Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Air New.
Diversification Opportunities for Canadian Utilities and Air New
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Canadian and Air is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Air New Zealand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air New Zealand and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with Air New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air New Zealand has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and Air New go up and down completely randomly.
Pair Corralation between Canadian Utilities and Air New
Assuming the 90 days horizon Canadian Utilities Limited is expected to generate 0.68 times more return on investment than Air New. However, Canadian Utilities Limited is 1.46 times less risky than Air New. It trades about 0.01 of its potential returns per unit of risk. Air New Zealand is currently generating about 0.0 per unit of risk. If you would invest 2,165 in Canadian Utilities Limited on October 27, 2024 and sell it today you would earn a total of 93.00 from holding Canadian Utilities Limited or generate 4.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. Air New Zealand
Performance |
| Timeline |
| Canadian Utilities |
| Air New Zealand |
Canadian Utilities and Air New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and Air New
The main advantage of trading using opposite Canadian Utilities and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, Air New 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 Air New will offset losses from the drop in Air New's long position.| Canadian Utilities vs. ARROW ELECTRONICS | Canadian Utilities vs. STMICROELECTRONICS | Canadian Utilities vs. National Beverage Corp | Canadian Utilities vs. MOLSON RS BEVERAGE |
| Air New vs. Addtech AB | Air New vs. TITANIUM TRANSPORTGROUP | Air New vs. EVS Broadcast Equipment | Air New vs. Sunny Optical Technology |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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