Correlation Between Air New and EasyJet Plc

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

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

Diversification Opportunities for Air New and EasyJet Plc

0.44

Correlation Coefficient

Air New  EasyJet Plc

Very weak diversification

The 3 months correlation between Air and EasyJet is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and easyJet plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on easyJet plc and Air New 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 New Zealand are associated (or correlated) with EasyJet Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of easyJet plc has no effect on the direction of Air New i.e., Air New and EasyJet Plc go up and down completely randomly.

Pair Corralation between Air New and EasyJet Plc

Assuming the 90 days horizon Air New is expected to generate 1.56 times less return on investment than EasyJet Plc. But when comparing it to its historical volatility, Air New Zealand is 1.06 times less risky than EasyJet Plc. It trades about 0.03 of its potential returns per unit of risk. easyJet plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  637.00  in easyJet plc on January 17, 2025 and sell it today you would earn a total of  40.00  from holding easyJet plc or generate 6.28% return on investment over 90 days.

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

Air New Zealand  vs.  easyJet plc

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 2 (%) 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.

easyJet plc

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Air New and EasyJet Plc

The main advantage of trading using opposite Air New and EasyJet Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, EasyJet Plc 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 EasyJet Plc will offset losses from the drop in EasyJet Plc's long position.

The idea behind Air New Zealand and easyJet plc 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.