Correlation Between Air New and Bank Of

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

Diversification Opportunities for Air New and Bank Of

0.39

Correlation Coefficient

Air New  Bank Of

Weak diversification

The 3 months correlation between Air and Bank is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and The Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Bank 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 Bank Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Bank has no effect on the direction of Air New i.e., Air New and Bank Of go up and down completely randomly.

Pair Corralation between Air New and Bank Of

Assuming the 90 days trading horizon Air New is expected to generate 3.09 times less return on investment than Bank Of. In addition to that, Air New is 1.19 times more volatile than The Bank of. It trades about 0.05 of its total potential returns per unit of risk. The Bank of is currently generating about 0.17 per unit of volatility. If you would invest  5,291  in The Bank of on September 28, 2024 and sell it today you would earn a total of  2,262  from holding The Bank of or generate 42.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Air New Zealand  vs.  The Bank of

Air New Zealand

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 4 (%) 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 January 2025.

The Bank

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bank Of reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air New and Bank Of

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

The idea behind Air New Zealand and The Bank of 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.