Correlation Between Torque Metals and Air New

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

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

Diversification Opportunities for Torque Metals and Air New

-0.58

Correlation Coefficient

Torque Metals  Air New

Excellent diversification

The 3 months correlation between Torque and Air is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Torque Metals 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 Torque Metals 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 Torque Metals 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 Torque Metals i.e., Torque Metals and Air New go up and down completely randomly.

Pair Corralation between Torque Metals and Air New

Assuming the 90 days trading horizon Torque Metals is expected to under-perform the Air New. In addition to that, Torque Metals is 3.42 times more volatile than Air New Zealand. It trades about -0.11 of its total potential returns per unit of risk. Air New Zealand is currently generating about 0.15 per unit of volatility. If you would invest  48.00  in Air New Zealand on October 10, 2024 and sell it today you would earn a total of  6.00  from holding Air New Zealand or generate 12.5% return on investment over 90 days.

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

Torque Metals  vs.  Air New Zealand

Torque Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Torque Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Air New Zealand

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Air New unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Torque Metals and Air New

The main advantage of trading using opposite Torque Metals and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Torque Metals 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 Torque Metals 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.