Correlation Between AirAsia Group and International Consolidated
Can any of the company-specific risk be diversified away by investing in both AirAsia Group and International Consolidated 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 International Consolidated 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 International Consolidated Airlines, you can compare the effects of market volatilities on AirAsia Group and International Consolidated 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 International Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of AirAsia Group and International Consolidated.
Diversification Opportunities for AirAsia Group and International Consolidated
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between AirAsia and International is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding AirAsia Group Berhad and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated 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 International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of AirAsia Group i.e., AirAsia Group and International Consolidated go up and down completely randomly.
Pair Corralation between AirAsia Group and International Consolidated
Assuming the 90 days horizon AirAsia Group Berhad is expected to generate 3.3 times more return on investment than International Consolidated. However, AirAsia Group is 3.3 times more volatile than International Consolidated Airlines. It trades about 0.05 of its potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.12 per unit of risk. If you would invest 15.00 in AirAsia Group Berhad on August 25, 2024 and sell it today you would earn a total of 5.00 from holding AirAsia Group Berhad or generate 33.33% 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. International Consolidated Air
Performance |
| Timeline |
| AirAsia Group Berhad |
| International Consolidated |
AirAsia Group and International Consolidated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AirAsia Group and International Consolidated
The main advantage of trading using opposite AirAsia Group and International Consolidated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AirAsia Group position performs unexpectedly, International Consolidated 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 International Consolidated will offset losses from the drop in International Consolidated's 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 |
| International Consolidated vs. Air France KLM SA | International Consolidated vs. Air France KLM | International Consolidated vs. Finnair Oyj | International Consolidated vs. AirAsia Group Berhad |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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