Correlation Between Air Asia and ECOVE Environment
Can any of the company-specific risk be diversified away by investing in both Air Asia and ECOVE Environment 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 ECOVE Environment 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 ECOVE Environment Corp, you can compare the effects of market volatilities on Air Asia and ECOVE Environment 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 ECOVE Environment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Asia and ECOVE Environment.
Diversification Opportunities for Air Asia and ECOVE Environment
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and ECOVE is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Air Asia Co and ECOVE Environment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECOVE Environment Corp 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 ECOVE Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECOVE Environment Corp has no effect on the direction of Air Asia i.e., Air Asia and ECOVE Environment go up and down completely randomly.
Pair Corralation between Air Asia and ECOVE Environment
Assuming the 90 days trading horizon Air Asia Co is expected to generate 7.22 times more return on investment than ECOVE Environment. However, Air Asia is 7.22 times more volatile than ECOVE Environment Corp. It trades about 0.21 of its potential returns per unit of risk. ECOVE Environment Corp is currently generating about 0.11 per unit of risk. If you would invest 3,245 in Air Asia Co on October 25, 2024 and sell it today you would earn a total of 560.00 from holding Air Asia Co or generate 17.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Asia Co vs. ECOVE Environment Corp
Performance |
| Timeline |
| Air Asia |
| ECOVE Environment Corp |
Air Asia and ECOVE Environment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Asia and ECOVE Environment
The main advantage of trading using opposite Air Asia and ECOVE Environment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Asia position performs unexpectedly, ECOVE Environment 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 ECOVE Environment will offset losses from the drop in ECOVE Environment's long position.| Air Asia vs. Kuo Yang Construction | Air Asia vs. Da Cin Construction Co | Air Asia vs. Chien Kuo Construction | Air Asia vs. Tex Ray Industrial Co |
| ECOVE Environment vs. Cleanaway Co | ECOVE Environment vs. Taiwan Secom Co | ECOVE Environment vs. Sunny Friend Environmental | ECOVE Environment vs. TTET Union Corp |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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