Correlation Between Environmental and Air New
Can any of the company-specific risk be diversified away by investing in both Environmental 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 Environmental and Air New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Environmental Group and Air New Zealand, you can compare the effects of market volatilities on Environmental 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 Environmental with a short position of Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Environmental and Air New.
Diversification Opportunities for Environmental and Air New
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Environmental and Air is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding The Environmental Group 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 Environmental 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 The Environmental Group 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 Environmental i.e., Environmental and Air New go up and down completely randomly.
Pair Corralation between Environmental and Air New
Assuming the 90 days trading horizon The Environmental Group is expected to generate 2.36 times more return on investment than Air New. However, Environmental is 2.36 times more volatile than Air New Zealand. It trades about 0.03 of its potential returns per unit of risk. Air New Zealand is currently generating about -0.03 per unit of risk. If you would invest 22.00 in The Environmental Group on September 12, 2024 and sell it today you would earn a total of 5.00 from holding The Environmental Group or generate 22.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Environmental Group vs. Air New Zealand
Performance |
| Timeline |
| The Environmental |
| Air New Zealand |
Environmental and Air New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Environmental and Air New
The main advantage of trading using opposite Environmental and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Environmental 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.| Environmental vs. Pinnacle Investment Management | Environmental vs. Bank of Queensland | Environmental vs. Prime Financial Group | Environmental vs. Perpetual Credit Income |
| Air New vs. Aneka Tambang Tbk | Air New vs. Commonwealth Bank of | Air New vs. ANZ Group Holdings | Air New vs. National Australia Bank |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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