Correlation Between Air Asia and Shiny Chemical
Can any of the company-specific risk be diversified away by investing in both Air Asia and Shiny Chemical 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 Asia and Shiny Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Asia Co and Shiny Chemical Industrial, you can compare the effects of market volatilities on Air Asia and Shiny Chemical 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 Asia with a short position of Shiny Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Asia and Shiny Chemical.
Diversification Opportunities for Air Asia and Shiny Chemical
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Air and Shiny is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Air Asia Co and Shiny Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shiny Chemical Industrial and Air Asia 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 Asia Co are associated (or correlated) with Shiny Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shiny Chemical Industrial has no effect on the direction of Air Asia i.e., Air Asia and Shiny Chemical go up and down completely randomly.
Pair Corralation between Air Asia and Shiny Chemical
Assuming the 90 days trading horizon Air Asia Co is expected to generate 1.6 times more return on investment than Shiny Chemical. However, Air Asia is 1.6 times more volatile than Shiny Chemical Industrial. It trades about 0.06 of its potential returns per unit of risk. Shiny Chemical Industrial is currently generating about 0.05 per unit of risk. If you would invest 1,564 in Air Asia Co on August 30, 2024 and sell it today you would earn a total of 1,486 from holding Air Asia Co or generate 95.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Asia Co vs. Shiny Chemical Industrial
Performance |
| Timeline |
| Air Asia |
| Shiny Chemical Industrial |
Air Asia and Shiny Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Asia and Shiny Chemical
The main advantage of trading using opposite Air Asia and Shiny Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Asia position performs unexpectedly, Shiny Chemical 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 Shiny Chemical will offset losses from the drop in Shiny Chemical's long position.| Air Asia vs. Aerospace Industrial Development | Air Asia vs. CSBC Corp Taiwan | Air Asia vs. Chaheng Precision Co |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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