Correlation Between Air Asia and NEXCOM International
Can any of the company-specific risk be diversified away by investing in both Air Asia and NEXCOM International 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 NEXCOM International 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 NEXCOM International Co, you can compare the effects of market volatilities on Air Asia and NEXCOM International 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 NEXCOM International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Asia and NEXCOM International.
Diversification Opportunities for Air Asia and NEXCOM International
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Air and NEXCOM is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Air Asia Co and NEXCOM International Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXCOM International 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 NEXCOM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXCOM International has no effect on the direction of Air Asia i.e., Air Asia and NEXCOM International go up and down completely randomly.
Pair Corralation between Air Asia and NEXCOM International
Assuming the 90 days trading horizon Air Asia Co is expected to generate 1.34 times more return on investment than NEXCOM International. However, Air Asia is 1.34 times more volatile than NEXCOM International Co. It trades about 0.02 of its potential returns per unit of risk. NEXCOM International Co is currently generating about 0.01 per unit of risk. If you would invest 3,200 in Air Asia Co on September 12, 2024 and sell it today you would earn a total of 20.00 from holding Air Asia Co or generate 0.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Asia Co vs. NEXCOM International Co
Performance |
| Timeline |
| Air Asia |
| NEXCOM International |
Air Asia and NEXCOM International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Asia and NEXCOM International
The main advantage of trading using opposite Air Asia and NEXCOM International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Asia position performs unexpectedly, NEXCOM International 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 NEXCOM International will offset losses from the drop in NEXCOM International's long position.| Air Asia vs. Aerospace Industrial Development | Air Asia vs. Ruentex Development Co | Air Asia vs. Symtek Automation Asia | Air Asia vs. CTCI Corp |
| NEXCOM International vs. United Radiant Technology | NEXCOM International vs. STL Technology Co | NEXCOM International vs. Tung Thih Electronic | NEXCOM International vs. Voltronic Power Technology |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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