Correlation Between Air New and Société Générale

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

Diversification Opportunities for Air New and Société Générale

0.33

Correlation Coefficient

Air New  Société Générale

Weak diversification

The 3 months correlation between Air and Société is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Socit Gnrale Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Socit Gnrale Socit 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 Société Générale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Socit Gnrale Socit has no effect on the direction of Air New i.e., Air New and Société Générale go up and down completely randomly.

Pair Corralation between Air New and Société Générale

Assuming the 90 days trading horizon Air New is expected to generate 1.21 times less return on investment than Société Générale. In addition to that, Air New is 1.71 times more volatile than Socit Gnrale Socit. It trades about 0.16 of its total potential returns per unit of risk. Socit Gnrale Socit is currently generating about 0.34 per unit of volatility. If you would invest  2,660  in Socit Gnrale Socit on October 22, 2024 and sell it today you would earn a total of  214.00  from holding Socit Gnrale Socit or generate 8.05% 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.  Socit Gnrale Socit

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.

Socit Gnrale Socit

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Socit Gnrale Socit are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Société Générale unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air New and Société Générale

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

The idea behind Air New Zealand and Socit Gnrale Socit 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.

Check out your portfolio center.

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.