Correlation Between Air New and GLG LIFE

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

Diversification Opportunities for Air New and GLG LIFE

0.0

Correlation Coefficient

Air New  GLG LIFE

Pay attention - limited upside

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

Pair Corralation between Air New and GLG LIFE

Assuming the 90 days trading horizon Air New Zealand is expected to under-perform the GLG LIFE. But the stock apears to be less risky and, when comparing its historical volatility, Air New Zealand is 27.46 times less risky than GLG LIFE. The stock trades about 0.0 of its potential returns per unit of risk. The GLG LIFE TECH is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.75  in GLG LIFE TECH on October 24, 2024 and sell it today you would earn a total of  0.25  from holding GLG LIFE TECH or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Air New Zealand  vs.  GLG LIFE TECH

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 rather fragile basic indicators, Air New may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GLG LIFE TECH

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Air New Zealand and GLG LIFE TECH 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.