Correlation Between Dow Jones and Air New
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Air New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Air New Zealand, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Air New.
Diversification Opportunities for Dow Jones and Air New
Very good diversification
The 3 months correlation between Dow and Air is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Air New go up and down completely randomly.
Pair Corralation between Dow Jones and Air New
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.77 times more return on investment than Air New. However, Dow Jones Industrial is 1.3 times less risky than Air New. It trades about 0.27 of its potential returns per unit of risk. Air New Zealand is currently generating about 0.15 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Air New Zealand
Performance |
| Timeline |
Dow Jones and Air New Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Air New Zealand
Pair trading matchups for Air New
Pair Trading with Dow Jones and Air New
The main advantage of trading using opposite Dow Jones and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| Air New vs. Macquarie Group | Air New vs. Macquarie Group Ltd | Air New vs. Commonwealth Bank | Air New vs. Rio Tinto |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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