Correlation Between Kip McGrath and Air New

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

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

Diversification Opportunities for Kip McGrath and Air New

0.83

Correlation Coefficient

Kip McGrath  Air New

Very poor diversification

The 3 months correlation between Kip and Air is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Kip McGrath Education 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 Kip McGrath 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 Kip McGrath Education 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 Kip McGrath i.e., Kip McGrath and Air New go up and down completely randomly.

Pair Corralation between Kip McGrath and Air New

Assuming the 90 days trading horizon Kip McGrath Education is expected to generate 1.5 times more return on investment than Air New. However, Kip McGrath is 1.5 times more volatile than Air New Zealand. It trades about 0.23 of its potential returns per unit of risk. Air New Zealand is currently generating about 0.11 per unit of risk. If you would invest  40.00  in Kip McGrath Education on September 22, 2024 and sell it today you would earn a total of  8.00  from holding Kip McGrath Education or generate 20.0% return on investment over 90 days.

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

Kip McGrath Education  vs.  Air New Zealand

Kip McGrath Education

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kip McGrath Education are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Kip McGrath is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Air New Zealand

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Air New is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Kip McGrath and Air New

The main advantage of trading using opposite Kip McGrath and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kip McGrath 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 Kip McGrath Education 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.