Correlation Between Air New and MYFAIR GOLD

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

Diversification Opportunities for Air New and MYFAIR GOLD

-0.4

Correlation Coefficient

Air New  MYFAIR GOLD

Very good diversification

The 3 months correlation between Air and MYFAIR is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and MYFAIR GOLD P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MYFAIR GOLD P 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 MYFAIR GOLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MYFAIR GOLD P has no effect on the direction of Air New i.e., Air New and MYFAIR GOLD go up and down completely randomly.

Pair Corralation between Air New and MYFAIR GOLD

Assuming the 90 days trading horizon Air New is expected to generate 47.1 times less return on investment than MYFAIR GOLD. But when comparing it to its historical volatility, Air New Zealand is 3.1 times less risky than MYFAIR GOLD. It trades about 0.01 of its potential returns per unit of risk. MYFAIR GOLD P is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  107.00  in MYFAIR GOLD P on September 20, 2024 and sell it today you would earn a total of  9.00  from holding MYFAIR GOLD P or generate 8.41% 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.  MYFAIR GOLD P

Air New Zealand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air New Zealand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Air New is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

MYFAIR GOLD P

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MYFAIR GOLD P are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MYFAIR GOLD is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Air New and MYFAIR GOLD

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

The idea behind Air New Zealand and MYFAIR GOLD P 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.