Correlation Between T-MOBILE and Air New

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

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

Diversification Opportunities for T-MOBILE and Air New

0.25

Correlation Coefficient

T-MOBILE  Air New

Modest diversification

The 3 months correlation between T-MOBILE and Air is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding T MOBILE US 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 T-MOBILE 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 T MOBILE US 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 T-MOBILE i.e., T-MOBILE and Air New go up and down completely randomly.

Pair Corralation between T-MOBILE and Air New

Assuming the 90 days trading horizon T MOBILE US is expected to under-perform the Air New. But the stock apears to be less risky and, when comparing its historical volatility, T MOBILE US is 2.02 times less risky than Air New. The stock trades about -0.17 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  31.00  in Air New Zealand on October 10, 2024 and sell it today you would earn a total of  1.00  from holding Air New Zealand or generate 3.23% return on investment over 90 days.

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

T MOBILE US  vs.  Air New Zealand

T MOBILE US

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in T MOBILE US are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, T-MOBILE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Air New Zealand

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 4 (%) 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 February 2025.

Pair Trading with T-MOBILE and Air New

The main advantage of trading using opposite T-MOBILE and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T-MOBILE 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 T MOBILE US 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.