Correlation Between EP Financial and Air New
Can any of the company-specific risk be diversified away by investing in both EP Financial 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 EP Financial and Air New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EP Financial Group and Air New Zealand, you can compare the effects of market volatilities on EP Financial 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 EP Financial with a short position of Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of EP Financial and Air New.
Diversification Opportunities for EP Financial and Air New
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between EP1 and Air is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding EP Financial 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 EP Financial 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 EP Financial 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 EP Financial i.e., EP Financial and Air New go up and down completely randomly.
Pair Corralation between EP Financial and Air New
Assuming the 90 days trading horizon EP Financial Group is expected to generate 2.5 times more return on investment than Air New. However, EP Financial is 2.5 times more volatile than Air New Zealand. It trades about 0.05 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 39.00 in EP Financial Group on September 1, 2024 and sell it today you would earn a total of 13.00 from holding EP Financial Group or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EP Financial Group vs. Air New Zealand
Performance |
| Timeline |
| EP Financial Group |
| Air New Zealand |
EP Financial and Air New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EP Financial and Air New
The main advantage of trading using opposite EP Financial and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EP Financial 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.| EP Financial vs. Navigator Global Investments | EP Financial vs. Collins Foods | EP Financial vs. Hotel Property Investments | EP Financial vs. Queste Communications |
| Air New vs. Carlton Investments | Air New vs. Auctus Alternative Investments | Air New vs. Diversified United Investment | Air New vs. REGAL ASIAN INVESTMENTS |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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