Correlation Between Vulcan Steel and Air New

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

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

Diversification Opportunities for Vulcan Steel and Air New

-0.25

Correlation Coefficient

Vulcan Steel  Air New

Very good diversification

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

Pair Corralation between Vulcan Steel and Air New

Assuming the 90 days trading horizon Vulcan Steel is expected to generate 1.73 times more return on investment than Air New. However, Vulcan Steel is 1.73 times more volatile than Air New Zealand. It trades about 0.01 of its potential returns per unit of risk. Air New Zealand is currently generating about -0.02 per unit of risk. If you would invest  772.00  in Vulcan Steel on September 2, 2024 and sell it today you would lose (40.00) from holding Vulcan Steel or give up 5.18% of portfolio value over 90 days.

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

Vulcan Steel  vs.  Air New Zealand

Vulcan Steel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Vulcan Steel 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

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 2 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vulcan Steel and Air New

The main advantage of trading using opposite Vulcan Steel and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Steel 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 Vulcan Steel 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.