Correlation Between Air New and Dexus Convenience

Can any of the company-specific risk be diversified away by investing in both Air New and Dexus Convenience 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 Air New and Dexus Convenience into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Air New Zealand and Dexus Convenience Retail, you can compare the effects of market volatilities on Air New and Dexus Convenience 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 Air New with a short position of Dexus Convenience. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Dexus Convenience.

Diversification Opportunities for Air New and Dexus Convenience

-0.33

Correlation Coefficient

Air New  Dexus Convenience

Very good diversification

The 3 months correlation between Air and Dexus is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Dexus Convenience Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dexus Convenience Retail and Air New 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 Air New Zealand are associated (or correlated) with Dexus Convenience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dexus Convenience Retail has no effect on the direction of Air New i.e., Air New and Dexus Convenience go up and down completely randomly.

Pair Corralation between Air New and Dexus Convenience

Assuming the 90 days trading horizon Air New Zealand is expected to generate 1.09 times more return on investment than Dexus Convenience. However, Air New is 1.09 times more volatile than Dexus Convenience Retail. It trades about 0.07 of its potential returns per unit of risk. Dexus Convenience Retail is currently generating about 0.03 per unit of risk. If you would invest  49.00  in Air New Zealand on September 20, 2024 and sell it today you would earn a total of  2.00  from holding Air New Zealand or generate 4.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Air New Zealand  vs.  Dexus Convenience Retail

Air New Zealand

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Air New is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Dexus Convenience Retail

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dexus Convenience Retail are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Dexus Convenience is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Air New and Dexus Convenience

The main advantage of trading using opposite Air New and Dexus Convenience positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Dexus Convenience 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 Dexus Convenience will offset losses from the drop in Dexus Convenience's long position.

The idea behind Air New Zealand and Dexus Convenience Retail pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.