Correlation Between Air New and LAir Liquide

Can any of the company-specific risk be diversified away by investing in both Air New and LAir Liquide 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 LAir Liquide 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 LAir Liquide SA, you can compare the effects of market volatilities on Air New and LAir Liquide 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 LAir Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and LAir Liquide.

Diversification Opportunities for Air New and LAir Liquide

-0.35

Correlation Coefficient

Air New  LAir Liquide

Very good diversification

The 3 months correlation between Air and LAir is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and LAir Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAir Liquide SA 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 LAir Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAir Liquide SA has no effect on the direction of Air New i.e., Air New and LAir Liquide go up and down completely randomly.

Pair Corralation between Air New and LAir Liquide

Assuming the 90 days trading horizon Air New Zealand is expected to generate 1.8 times more return on investment than LAir Liquide. However, Air New is 1.8 times more volatile than LAir Liquide SA. It trades about -0.02 of its potential returns per unit of risk. LAir Liquide SA is currently generating about -0.16 per unit of risk. If you would invest  30.00  in Air New Zealand on September 24, 2024 and sell it today you would lose (1.00) from holding Air New Zealand or give up 3.33% of portfolio value over 90 days.

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

Air New Zealand  vs.  LAir Liquide SA

Air New Zealand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air New Zealand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Air New is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

LAir Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAir Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Air New and LAir Liquide

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

The idea behind Air New Zealand and LAir Liquide SA 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.

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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 CEOs Directory module to screen CEOs from public companies around the world.