Correlation Between British American and AirAsia X
Can any of the company-specific risk be diversified away by investing in both British American and AirAsia X 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 British American and AirAsia X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and AirAsia X Bhd, you can compare the effects of market volatilities on British American and AirAsia X 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 British American with a short position of AirAsia X. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and AirAsia X.
Diversification Opportunities for British American and AirAsia X
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between British and AirAsia is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and AirAsia X Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AirAsia X Bhd and British American 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 British American Tobacco are associated (or correlated) with AirAsia X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AirAsia X Bhd has no effect on the direction of British American i.e., British American and AirAsia X go up and down completely randomly.
Pair Corralation between British American and AirAsia X
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.25 times more return on investment than AirAsia X. However, British American Tobacco is 4.04 times less risky than AirAsia X. It trades about -0.24 of its potential returns per unit of risk. AirAsia X Bhd is currently generating about -0.2 per unit of risk. If you would invest 739.00 in British American Tobacco on November 4, 2024 and sell it today you would lose (22.00) from holding British American Tobacco or give up 2.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. AirAsia X Bhd
Performance |
| Timeline |
| British American Tobacco |
| AirAsia X Bhd |
British American and AirAsia X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and AirAsia X
The main advantage of trading using opposite British American and AirAsia X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, AirAsia X 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 AirAsia X will offset losses from the drop in AirAsia X's long position.| British American vs. Oriental Food Industries | British American vs. Berjaya Food Bhd | British American vs. Press Metal Bhd | British American vs. Steel Hawk Berhad |
| AirAsia X vs. Cosmos Technology International | AirAsia X vs. Mycron Steel Bhd | AirAsia X vs. YX Precious Metals | AirAsia X vs. PMB Technology Bhd |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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