Correlation Between Air New and ArcelorMittal

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

Diversification Opportunities for Air New and ArcelorMittal

-0.16

Correlation Coefficient

Air New  ArcelorMittal

Good diversification

The 3 months correlation between Air and ArcelorMittal is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA has no effect on the direction of Air New i.e., Air New and ArcelorMittal go up and down completely randomly.

Pair Corralation between Air New and ArcelorMittal

Assuming the 90 days trading horizon Air New Zealand is expected to generate 1.0 times more return on investment than ArcelorMittal. However, Air New Zealand is 1.0 times less risky than ArcelorMittal. It trades about 0.0 of its potential returns per unit of risk. ArcelorMittal SA is currently generating about -0.01 per unit of risk. If you would invest  36.00  in Air New Zealand on October 23, 2024 and sell it today you would lose (3.00) from holding Air New Zealand or give up 8.33% of portfolio value over 90 days.

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

Air New Zealand  vs.  ArcelorMittal SA

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

ArcelorMittal SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ArcelorMittal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Air New and ArcelorMittal

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

The idea behind Air New Zealand and ArcelorMittal SA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.