Correlation Between Air New and RedFlow

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

Diversification Opportunities for Air New and RedFlow

0.0

Correlation Coefficient

Air New  RedFlow

Pay attention - limited upside

The 3 months correlation between Air and RedFlow is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and RedFlow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RedFlow 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 RedFlow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RedFlow has no effect on the direction of Air New i.e., Air New and RedFlow go up and down completely randomly.

Pair Corralation between Air New and RedFlow

Assuming the 90 days trading horizon Air New Zealand is expected to under-perform the RedFlow. But the stock apears to be less risky and, when comparing its historical volatility, Air New Zealand is 3.97 times less risky than RedFlow. The stock trades about -0.01 of its potential returns per unit of risk. The RedFlow is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  20.00  in RedFlow on December 2, 2024 and sell it today you would lose (10.30) from holding RedFlow or give up 51.5% of portfolio value over 90 days.

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

Air New Zealand  vs.  RedFlow

Air New Zealand

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Air New may actually be approaching a critical reversion point that can send shares even higher in April 2025.

RedFlow

Risk-Adjusted Performance

Very Weak

Over the last 90 days RedFlow has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, RedFlow 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 RedFlow

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

The idea behind Air New Zealand and RedFlow 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.