Correlation Between AirAsia Group and Dow Jones
Can any of the company-specific risk be diversified away by investing in both AirAsia Group and Dow Jones 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 AirAsia Group and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AirAsia Group Berhad and Dow Jones Industrial, you can compare the effects of market volatilities on AirAsia Group and Dow Jones 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 AirAsia Group with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of AirAsia Group and Dow Jones.
Diversification Opportunities for AirAsia Group and Dow Jones
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between AirAsia and Dow is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding AirAsia Group Berhad and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and AirAsia Group 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 AirAsia Group Berhad are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of AirAsia Group i.e., AirAsia Group and Dow Jones go up and down completely randomly.
Pair Corralation between AirAsia Group and Dow Jones
Assuming the 90 days horizon AirAsia Group Berhad is expected to generate 8.8 times more return on investment than Dow Jones. However, AirAsia Group is 8.8 times more volatile than Dow Jones Industrial. It trades about 0.05 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 10.00 in AirAsia Group Berhad on August 25, 2024 and sell it today you would earn a total of 10.00 from holding AirAsia Group Berhad or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AirAsia Group Berhad vs. Dow Jones Industrial
Performance |
| Timeline |
AirAsia Group and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
AirAsia Group Berhad
Pair trading matchups for AirAsia Group
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with AirAsia Group and Dow Jones
The main advantage of trading using opposite AirAsia Group and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AirAsia Group position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| AirAsia Group vs. Air New Zealand | AirAsia Group vs. ANA Holdings ADR | AirAsia Group vs. Cebu Air | AirAsia Group vs. Air France KLM SA |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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