Correlation Between Auckland International and Scottie Resources

Can any of the company-specific risk be diversified away by investing in both Auckland International and Scottie Resources 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 Auckland International and Scottie Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Auckland International Airport and Scottie Resources Corp, you can compare the effects of market volatilities on Auckland International and Scottie Resources 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 Auckland International with a short position of Scottie Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auckland International and Scottie Resources.

Diversification Opportunities for Auckland International and Scottie Resources

0.16

Correlation Coefficient

Auckland International  Scottie Resources

Average diversification

The 3 months correlation between Auckland and Scottie is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Auckland International Airport and Scottie Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scottie Resources Corp and Auckland International 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 Auckland International Airport are associated (or correlated) with Scottie Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scottie Resources Corp has no effect on the direction of Auckland International i.e., Auckland International and Scottie Resources go up and down completely randomly.

Pair Corralation between Auckland International and Scottie Resources

Assuming the 90 days horizon Auckland International Airport is expected to under-perform the Scottie Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Auckland International Airport is 36.15 times less risky than Scottie Resources. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Scottie Resources Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Scottie Resources Corp on August 31, 2024 and sell it today you would lose (2.00) from holding Scottie Resources Corp or give up 14.29% of portfolio value over 90 days.

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

Auckland International Airport  vs.  Scottie Resources Corp

Auckland International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auckland International Airport has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Auckland International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Scottie Resources Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scottie Resources Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Scottie Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Auckland International and Scottie Resources

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

The idea behind Auckland International Airport and Scottie Resources Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.