Correlation Between Medical Developments and Air New
Can any of the company-specific risk be diversified away by investing in both Medical Developments 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 Medical Developments and Air New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medical Developments International and Air New Zealand, you can compare the effects of market volatilities on Medical Developments 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 Medical Developments with a short position of Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medical Developments and Air New.
Diversification Opportunities for Medical Developments and Air New
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Medical and Air is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Medical Developments Internati 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 Medical Developments 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 Medical Developments International 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 Medical Developments i.e., Medical Developments and Air New go up and down completely randomly.
Pair Corralation between Medical Developments and Air New
Assuming the 90 days trading horizon Medical Developments International is expected to generate 9.39 times more return on investment than Air New. However, Medical Developments is 9.39 times more volatile than Air New Zealand. It trades about 0.26 of its potential returns per unit of risk. Air New Zealand is currently generating about -0.11 per unit of risk. If you would invest 42.00 in Medical Developments International on November 27, 2024 and sell it today you would earn a total of 33.00 from holding Medical Developments International or generate 78.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Medical Developments Internati vs. Air New Zealand
Performance |
| Timeline |
| Medical Developments |
| Air New Zealand |
Medical Developments and Air New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medical Developments and Air New
The main advantage of trading using opposite Medical Developments and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical Developments 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.| Medical Developments vs. Autosports Group | Medical Developments vs. Gold Road Resources | Medical Developments vs. Australian Unity Office | Medical Developments vs. Infomedia |
| Air New vs. ARN Media Limited | Air New vs. Aurelia Metals | Air New vs. Truscott Mining Corp | Air New vs. COAST ENTERTAINMENT HOLDINGS |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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