Correlation Between Air New and USS Co

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

Diversification Opportunities for Air New and USS Co

0.36

Correlation Coefficient

Air New  USS Co

Weak diversification

The 3 months correlation between Air and USS is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and USS Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USS Co 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 USS Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USS Co has no effect on the direction of Air New i.e., Air New and USS Co go up and down completely randomly.

Pair Corralation between Air New and USS Co

Assuming the 90 days trading horizon Air New Zealand is expected to generate 1.49 times more return on investment than USS Co. However, Air New is 1.49 times more volatile than USS Co. It trades about 0.09 of its potential returns per unit of risk. USS Co is currently generating about 0.08 per unit of risk. If you would invest  30.00  in Air New Zealand on December 19, 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 Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Air New Zealand  vs.  USS Co

Air New Zealand

Risk-Adjusted Performance

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

USS Co

Risk-Adjusted Performance

Modest

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

Pair Trading with Air New and USS Co

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

The idea behind Air New Zealand and USS Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.