Correlation Between Titan Company and Air New

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

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

Diversification Opportunities for Titan Company and Air New

0.73

Correlation Coefficient

Titan Company  Air New

Poor diversification

The 3 months correlation between Titan and Air is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited 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 Titan Company 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 Titan Company Limited 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 Titan Company i.e., Titan Company and Air New go up and down completely randomly.

Pair Corralation between Titan Company and Air New

Assuming the 90 days trading horizon Titan Company Limited is expected to generate 0.4 times more return on investment than Air New. However, Titan Company Limited is 2.49 times less risky than Air New. It trades about -0.1 of its potential returns per unit of risk. Air New Zealand is currently generating about -0.1 per unit of risk. If you would invest  360,770  in Titan Company Limited on September 4, 2024 and sell it today you would lose (30,085) from holding Titan Company Limited or give up 8.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Titan Company Limited  vs.  Air New Zealand

Titan Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Company Limited 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Titan Company and Air New

The main advantage of trading using opposite Titan Company and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Company 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.

The idea behind Titan Company Limited and Air New Zealand 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.