Correlation Between Chien Kuo and Air Asia
Can any of the company-specific risk be diversified away by investing in both Chien Kuo and Air Asia 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 Chien Kuo and Air Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chien Kuo Construction and Air Asia Co, you can compare the effects of market volatilities on Chien Kuo and Air Asia 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 Chien Kuo with a short position of Air Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chien Kuo and Air Asia.
Diversification Opportunities for Chien Kuo and Air Asia
Good diversification
The 3 months correlation between Chien and Air is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Chien Kuo Construction and Air Asia Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Asia and Chien Kuo 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 Chien Kuo Construction are associated (or correlated) with Air Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Asia has no effect on the direction of Chien Kuo i.e., Chien Kuo and Air Asia go up and down completely randomly.
Pair Corralation between Chien Kuo and Air Asia
Assuming the 90 days trading horizon Chien Kuo Construction is expected to generate 0.56 times more return on investment than Air Asia. However, Chien Kuo Construction is 1.78 times less risky than Air Asia. It trades about 0.33 of its potential returns per unit of risk. Air Asia Co is currently generating about -0.05 per unit of risk. If you would invest 2,565 in Chien Kuo Construction on November 4, 2024 and sell it today you would earn a total of 210.00 from holding Chien Kuo Construction or generate 8.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chien Kuo Construction vs. Air Asia Co
Performance |
| Timeline |
| Chien Kuo Construction |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Air Asia |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Chien Kuo and Air Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chien Kuo and Air Asia
The main advantage of trading using opposite Chien Kuo and Air Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chien Kuo position performs unexpectedly, Air Asia 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 Air Asia will offset losses from the drop in Air Asia's long position.The idea behind Chien Kuo Construction and Air Asia Co 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.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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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