Correlation Between Air New and Hammer Metals

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

Diversification Opportunities for Air New and Hammer Metals

-0.7

Correlation Coefficient

Air New  Hammer Metals

Excellent diversification

The 3 months correlation between Air and Hammer is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Hammer Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammer Metals 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 Hammer Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammer Metals has no effect on the direction of Air New i.e., Air New and Hammer Metals go up and down completely randomly.

Pair Corralation between Air New and Hammer Metals

Assuming the 90 days trading horizon Air New Zealand is expected to generate 0.33 times more return on investment than Hammer Metals. However, Air New Zealand is 3.02 times less risky than Hammer Metals. It trades about 0.16 of its potential returns per unit of risk. Hammer Metals is currently generating about -0.15 per unit of risk. If you would invest  48.00  in Air New Zealand on October 25, 2024 and sell it today you would earn a total of  7.00  from holding Air New Zealand or generate 14.58% return on investment over 90 days.

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

Air New Zealand  vs.  Hammer Metals

Air New Zealand

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Air New unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hammer Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hammer Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Air New and Hammer Metals

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

The idea behind Air New Zealand and Hammer Metals 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.