Correlation Between Air New and Jazz Pharmaceuticals

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

Diversification Opportunities for Air New and Jazz Pharmaceuticals

-0.1

Correlation Coefficient

Air New  Jazz Pharmaceuticals

Good diversification

The 3 months correlation between Air and Jazz is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Jazz Pharmaceuticals plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jazz Pharmaceuticals plc 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 Jazz Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jazz Pharmaceuticals plc has no effect on the direction of Air New i.e., Air New and Jazz Pharmaceuticals go up and down completely randomly.

Pair Corralation between Air New and Jazz Pharmaceuticals

Assuming the 90 days trading horizon Air New is expected to generate 1.27 times less return on investment than Jazz Pharmaceuticals. But when comparing it to its historical volatility, Air New Zealand is 1.04 times less risky than Jazz Pharmaceuticals. It trades about 0.07 of its potential returns per unit of risk. Jazz Pharmaceuticals plc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11,900  in Jazz Pharmaceuticals plc on December 25, 2024 and sell it today you would earn a total of  1,005  from holding Jazz Pharmaceuticals plc or generate 8.45% return on investment over 90 days.

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

Air New Zealand  vs.  Jazz Pharmaceuticals plc

Air New Zealand

Risk-Adjusted Performance

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 April 2025.

Jazz Pharmaceuticals plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jazz Pharmaceuticals plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Jazz Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Air New and Jazz Pharmaceuticals

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

The idea behind Air New Zealand and Jazz Pharmaceuticals plc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.