Correlation Between Carsales and Air New
Can any of the company-specific risk be diversified away by investing in both Carsales 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 Carsales and Air New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and Air New Zealand, you can compare the effects of market volatilities on Carsales 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 Carsales with a short position of Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Air New.
Diversification Opportunities for Carsales and Air New
Average diversification
The 3 months correlation between Carsales and Air is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom 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 Carsales 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 CarsalesCom 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 Carsales i.e., Carsales and Air New go up and down completely randomly.
Pair Corralation between Carsales and Air New
Assuming the 90 days horizon CarsalesCom is expected to under-perform the Air New. But the stock apears to be less risky and, when comparing its historical volatility, CarsalesCom is 1.03 times less risky than Air New. The stock trades about -0.11 of its potential returns per unit of risk. The Air New Zealand is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 29.00 in Air New Zealand on December 20, 2024 and sell it today you would earn a total of 4.00 from holding Air New Zealand or generate 13.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
CarsalesCom vs. Air New Zealand
Performance |
Timeline |
CarsalesCom |
Air New Zealand |
Carsales and Air New Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Carsales and Air New
The main advantage of trading using opposite Carsales and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales 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.Carsales vs. Granite Construction | Carsales vs. VIVA WINE GROUP | Carsales vs. Flowers Foods | Carsales vs. MIRAMAR HOTEL INV |
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Check out your portfolio center.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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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