Correlation Between Macquarie and Air New
Can any of the company-specific risk be diversified away by investing in both Macquarie 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 Macquarie and Air New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macquarie Group and Air New Zealand, you can compare the effects of market volatilities on Macquarie 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 Macquarie with a short position of Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie and Air New.
Diversification Opportunities for Macquarie and Air New
Very good diversification
The 3 months correlation between Macquarie and Air is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie 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 Macquarie 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 Macquarie 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 Macquarie i.e., Macquarie and Air New go up and down completely randomly.
Pair Corralation between Macquarie and Air New
Assuming the 90 days trading horizon Macquarie is expected to generate 4.66 times less return on investment than Air New. In addition to that, Macquarie is 1.1 times more volatile than Air New Zealand. It trades about 0.06 of its total potential returns per unit of risk. Air New Zealand is currently generating about 0.31 per unit of volatility. If you would invest 47.00 in Air New Zealand on August 31, 2024 and sell it today you would earn a total of 4.00 from holding Air New Zealand or generate 8.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Macquarie Group vs. Air New Zealand
Performance |
| Timeline |
| Macquarie Group |
| Air New Zealand |
Macquarie and Air New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macquarie and Air New
The main advantage of trading using opposite Macquarie and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie 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.| Macquarie vs. Finexia Financial Group | Macquarie vs. Macquarie Bank Limited | Macquarie vs. Pioneer Credit | Macquarie vs. Talisman Mining |
| Air New vs. Aristocrat Leisure | Air New vs. MFF Capital Investments | Air New vs. Andean Silver Limited | Air New vs. Kingsrose Mining |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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