Correlation Between Dow Jones and AirAsia X
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and AirAsia X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and AirAsia X Bhd, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of AirAsia X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and AirAsia X.
Diversification Opportunities for Dow Jones and AirAsia X
Poor diversification
The 3 months correlation between Dow and AirAsia is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and AirAsia X go up and down completely randomly.
Pair Corralation between Dow Jones and AirAsia X
Assuming the 90 days trading horizon Dow Jones is expected to generate 6.05 times less return on investment than AirAsia X. But when comparing it to its historical volatility, Dow Jones Industrial is 5.55 times less risky than AirAsia X. It trades about 0.08 of its potential returns per unit of risk. AirAsia X Bhd is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 49.00 in AirAsia X Bhd on September 16, 2024 and sell it today you would earn a total of 140.00 from holding AirAsia X Bhd or generate 285.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.78% |
| Values | Daily Returns |
Dow Jones Industrial vs. AirAsia X Bhd
Performance |
| Timeline |
Dow Jones and AirAsia X Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
AirAsia X Bhd
Pair trading matchups for AirAsia X
Pair Trading with Dow Jones and AirAsia X
The main advantage of trading using opposite Dow Jones and AirAsia X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Ironveld Plc | Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Mid Atlantic Home Health | Dow Jones vs. United Homes Group |
| AirAsia X vs. Public Packages Holdings | AirAsia X vs. Binasat Communications Bhd | AirAsia X vs. Awanbiru Technology Bhd | AirAsia X vs. Sports Toto 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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