Correlation Between Yamaha and Air New
Can any of the company-specific risk be diversified away by investing in both Yamaha 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 Yamaha and Air New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yamaha Motor Co and Air New Zealand, you can compare the effects of market volatilities on Yamaha 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 Yamaha with a short position of Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yamaha and Air New.
Diversification Opportunities for Yamaha and Air New
Weak diversification
The 3 months correlation between Yamaha and Air is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Yamaha Motor Co 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 Yamaha 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 Yamaha Motor Co 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 Yamaha i.e., Yamaha and Air New go up and down completely randomly.
Pair Corralation between Yamaha and Air New
Assuming the 90 days horizon Yamaha is expected to generate 9.68 times less return on investment than Air New. But when comparing it to its historical volatility, Yamaha Motor Co is 1.06 times less risky than Air New. It trades about 0.01 of its potential returns per unit of risk. Air New Zealand is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 30.00 in Air New Zealand on September 12, 2024 and sell it today you would earn a total of 1.00 from holding Air New Zealand or generate 3.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yamaha Motor Co vs. Air New Zealand
Performance |
| Timeline |
| Yamaha Motor |
| Air New Zealand |
Yamaha and Air New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yamaha and Air New
The main advantage of trading using opposite Yamaha and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yamaha 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.| Yamaha vs. GAMESTOP | Yamaha vs. VARIOUS EATERIES LS | Yamaha vs. CECO ENVIRONMENTAL | Yamaha vs. SWISS WATER DECAFFCOFFEE |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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