Correlation Between Universal Entertainment and Air New

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Can any of the company-specific risk be diversified away by investing in both Universal Entertainment 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 Universal Entertainment and Air New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Entertainment and Air New Zealand, you can compare the effects of market volatilities on Universal Entertainment 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 Universal Entertainment with a short position of Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Entertainment and Air New.

Diversification Opportunities for Universal Entertainment and Air New

-0.65
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Universal and Air is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Universal Entertainment 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 Universal Entertainment 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 Universal Entertainment 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 Universal Entertainment i.e., Universal Entertainment and Air New go up and down completely randomly.

Pair Corralation between Universal Entertainment and Air New

Assuming the 90 days trading horizon Universal Entertainment is expected to generate 1.23 times more return on investment than Air New. However, Universal Entertainment is 1.23 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 0.16 per unit of risk. If you would invest  585.00  in Universal Entertainment on October 22, 2024 and sell it today you would earn a total of  65.00  from holding Universal Entertainment or generate 11.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Universal Entertainment  vs.  Air New Zealand

 Performance 
       Timeline  
Universal Entertainment 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Universal Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic 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

7 of 100

 
Weak
 
Strong
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 unsteady basic indicators, Air New exhibited solid returns over the last few months and may actually be approaching a breakup point.

Universal Entertainment and Air New Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Universal Entertainment and Air New

The main advantage of trading using opposite Universal Entertainment and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Entertainment 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 Universal Entertainment 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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