Correlation Between Macquarie and Air New

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

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

Diversification Opportunities for Macquarie and Air New

0.39

Correlation Coefficient

Macquarie  Air New

Weak diversification

The 3 months correlation between Macquarie and Air is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group 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 Macquarie 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 Macquarie Group 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 Macquarie i.e., Macquarie and Air New go up and down completely randomly.

Pair Corralation between Macquarie and Air New

Assuming the 90 days trading horizon Macquarie Group is expected to generate 0.88 times more return on investment than Air New. However, Macquarie Group is 1.13 times less risky than Air New. It trades about 0.05 of its potential returns per unit of risk. Air New Zealand is currently generating about -0.01 per unit of risk. If you would invest  16,935  in Macquarie Group on December 2, 2024 and sell it today you would earn a total of  5,724  from holding Macquarie Group or generate 33.8% return on investment over 90 days.

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

Macquarie Group  vs.  Air New Zealand

Macquarie Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Macquarie Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Macquarie 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

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Air New may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Macquarie and Air New

The main advantage of trading using opposite Macquarie and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie 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 Macquarie Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.