Correlation Between Air New and TELECOM PLUS

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

Diversification Opportunities for Air New and TELECOM PLUS

-0.12

Correlation Coefficient

Air New  TELECOM PLUS

Good diversification

The 3 months correlation between Air and TELECOM is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and TELECOM PLUS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELECOM PLUS 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 TELECOM PLUS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TELECOM PLUS PLC has no effect on the direction of Air New i.e., Air New and TELECOM PLUS go up and down completely randomly.

Pair Corralation between Air New and TELECOM PLUS

Assuming the 90 days trading horizon Air New Zealand is expected to generate 1.02 times more return on investment than TELECOM PLUS. However, Air New is 1.02 times more volatile than TELECOM PLUS PLC. It trades about 0.08 of its potential returns per unit of risk. TELECOM PLUS PLC is currently generating about -0.04 per unit of risk. If you would invest  30.00  in Air New Zealand on October 26, 2024 and sell it today you would earn a total of  3.00  from holding Air New Zealand or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Air New Zealand  vs.  TELECOM PLUS PLC

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

TELECOM PLUS PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TELECOM PLUS PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Air New and TELECOM PLUS

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

The idea behind Air New Zealand and TELECOM PLUS 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.