Correlation Between Air New and INTERSHOP Communications

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

Diversification Opportunities for Air New and INTERSHOP Communications

-0.45

Correlation Coefficient

Air New  INTERSHOP Communications

Very good diversification

The 3 months correlation between Air and INTERSHOP is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and INTERSHOP Communications Aktie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERSHOP Communications 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 INTERSHOP Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERSHOP Communications has no effect on the direction of Air New i.e., Air New and INTERSHOP Communications go up and down completely randomly.

Pair Corralation between Air New and INTERSHOP Communications

Assuming the 90 days trading horizon Air New Zealand is expected to generate 0.88 times more return on investment than INTERSHOP Communications. However, Air New Zealand is 1.14 times less risky than INTERSHOP Communications. It trades about 0.05 of its potential returns per unit of risk. INTERSHOP Communications Aktiengesellschaft is currently generating about -0.04 per unit of risk. If you would invest  31.00  in Air New Zealand on October 22, 2024 and sell it today you would earn a total of  3.00  from holding Air New Zealand or generate 9.68% 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.  INTERSHOP Communications Aktie

Air New Zealand

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Air New exhibited solid returns over the last few months and may actually be approaching a breakup point.

INTERSHOP Communications

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, INTERSHOP Communications is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Air New and INTERSHOP Communications

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

The idea behind Air New Zealand and INTERSHOP Communications Aktiengesellschaft 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.