Correlation Between FactSet Research and Air New

Can any of the company-specific risk be diversified away by investing in both FactSet Research and Air New 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 FactSet Research and Air New into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FactSet Research Systems and Air New Zealand, you can compare the effects of market volatilities on FactSet Research and Air New 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 FactSet Research with a short position of Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of FactSet Research and Air New.

Diversification Opportunities for FactSet Research and Air New

-0.48

Correlation Coefficient

FactSet Research  Air New

Very good diversification

The 3 months correlation between FactSet and Air is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding FactSet Research Systems and Air New Zealand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air New Zealand and FactSet Research 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 FactSet Research Systems are associated (or correlated) with Air New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air New Zealand has no effect on the direction of FactSet Research i.e., FactSet Research and Air New go up and down completely randomly.

Pair Corralation between FactSet Research and Air New

Considering the 90-day investment horizon FactSet Research Systems is expected to under-perform the Air New. But the stock apears to be less risky and, when comparing its historical volatility, FactSet Research Systems is 2.09 times less risky than Air New. The stock trades about -0.18 of its potential returns per unit of risk. The Air New Zealand is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Air New Zealand on November 29, 2024 and sell it today you would lose (1.00) from holding Air New Zealand or give up 2.86% of portfolio value over 90 days.

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

FactSet Research Systems  vs.  Air New Zealand

FactSet Research Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days FactSet Research Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Air New Zealand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air New Zealand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Air New is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FactSet Research and Air New

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

The idea behind FactSet Research Systems and Air New Zealand 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.