Correlation Between Air China and Air New

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

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

Diversification Opportunities for Air China and Air New

0.11

Correlation Coefficient

Air China  Air New

Average diversification

The 3 months correlation between Air and Air is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Air China Limited 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 Air China 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 Air China Limited 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 Air China i.e., Air China and Air New go up and down completely randomly.

Pair Corralation between Air China and Air New

Assuming the 90 days horizon Air China Limited is expected to under-perform the Air New. But the pink sheet apears to be less risky and, when comparing its historical volatility, Air China Limited is 1.01 times less risky than Air New. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Air New Zealand is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  39.00  in Air New Zealand on January 15, 2025 and sell it today you would lose (3.00) from holding Air New Zealand or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	50.63%
Values	Daily Returns

Air China Limited  vs.  Air New Zealand

Air China Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air China Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Air China is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Air New Zealand

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Air New may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Air China and Air New

The main advantage of trading using opposite Air China and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China 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 Air China Limited 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.