Correlation Between Air New and Torque Metals

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

Diversification Opportunities for Air New and Torque Metals

-0.58

Correlation Coefficient

Air New  Torque Metals

Excellent diversification

The 3 months correlation between Air and Torque is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Torque Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torque 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 Torque Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torque Metals has no effect on the direction of Air New i.e., Air New and Torque Metals go up and down completely randomly.

Pair Corralation between Air New and Torque Metals

Assuming the 90 days trading horizon Air New Zealand is expected to generate 0.27 times more return on investment than Torque Metals. However, Air New Zealand is 3.66 times less risky than Torque Metals. It trades about 0.26 of its potential returns per unit of risk. Torque Metals is currently generating about -0.11 per unit of risk. If you would invest  48.00  in Air New Zealand on October 6, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Air New Zealand  vs.  Torque Metals

Air New Zealand

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 11 (%) 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 February 2025.

Torque Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Torque 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 Torque Metals

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

The idea behind Air New Zealand and Torque 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.