Correlation Between Air France and Netmedia Group

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

By analyzing existing cross correlation between Air France KLM SA and Netmedia Group SA, you can compare the effects of market volatilities on Air France and Netmedia Group 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 France with a short position of Netmedia Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air France and Netmedia Group.

Diversification Opportunities for Air France and Netmedia Group

-0.39

Correlation Coefficient

Air France  Netmedia Group

Very good diversification

The 3 months correlation between Air and Netmedia is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA and Netmedia Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netmedia Group SA and Air France 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 France KLM SA are associated (or correlated) with Netmedia Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netmedia Group SA has no effect on the direction of Air France i.e., Air France and Netmedia Group go up and down completely randomly.

Pair Corralation between Air France and Netmedia Group

Assuming the 90 days horizon Air France KLM SA is expected to under-perform the Netmedia Group. But the stock apears to be less risky and, when comparing its historical volatility, Air France KLM SA is 1.22 times less risky than Netmedia Group. The stock trades about -0.05 of its potential returns per unit of risk. The Netmedia Group SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  170.00  in Netmedia Group SA on October 8, 2024 and sell it today you would earn a total of  13.00  from holding Netmedia Group SA or generate 7.65% return on investment over 90 days.

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

Air France KLM SA  vs.  Netmedia Group SA

Air France KLM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air France KLM SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Netmedia Group SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Netmedia Group SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Netmedia Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Air France and Netmedia Group

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

The idea behind Air France KLM SA and Netmedia Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.