Correlation Between Air New and FEMALE HEALTH

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

Diversification Opportunities for Air New and FEMALE HEALTH

-0.12

Correlation Coefficient

Air New  FEMALE HEALTH

Good diversification

The 3 months correlation between Air and FEMALE is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and FEMALE HEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEMALE HEALTH 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 FEMALE HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEMALE HEALTH has no effect on the direction of Air New i.e., Air New and FEMALE HEALTH go up and down completely randomly.

Pair Corralation between Air New and FEMALE HEALTH

Assuming the 90 days trading horizon Air New is expected to generate 101.46 times less return on investment than FEMALE HEALTH. But when comparing it to its historical volatility, Air New Zealand is 3.1 times less risky than FEMALE HEALTH. It trades about 0.01 of its potential returns per unit of risk. FEMALE HEALTH is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  55.00  in FEMALE HEALTH on September 20, 2024 and sell it today you would earn a total of  12.00  from holding FEMALE HEALTH or generate 21.82% 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.  FEMALE HEALTH

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.

FEMALE HEALTH

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Air New and FEMALE HEALTH

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

The idea behind Air New Zealand and FEMALE HEALTH 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.