Correlation Between Air New and Retail Food

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

Diversification Opportunities for Air New and Retail Food

0.18

Correlation Coefficient

Air New  Retail Food

Average diversification

The 3 months correlation between Air and Retail is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Retail Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Food Group 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 Retail Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Food Group has no effect on the direction of Air New i.e., Air New and Retail Food go up and down completely randomly.

Pair Corralation between Air New and Retail Food

Assuming the 90 days trading horizon Air New Zealand is expected to under-perform the Retail Food. But the stock apears to be less risky and, when comparing its historical volatility, Air New Zealand is 2.47 times less risky than Retail Food. The stock trades about -0.02 of its potential returns per unit of risk. The Retail Food Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  320.00  in Retail Food Group on September 20, 2024 and sell it today you would lose (54.00) from holding Retail Food Group or give up 16.87% of portfolio value over 90 days.

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

Air New Zealand  vs.  Retail Food Group

Air New Zealand

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Air New is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Retail Food Group

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Retail Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Retail Food is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Air New and Retail Food

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

The idea behind Air New Zealand and Retail Food Group 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.