Correlation Between Microsoft and AirAsia X
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and AirAsia X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AirAsia X Bhd, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of AirAsia X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AirAsia X.
Diversification Opportunities for Microsoft and AirAsia X
Good diversification
The 3 months correlation between Microsoft and AirAsia is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and AirAsia X go up and down completely randomly.
Pair Corralation between Microsoft and AirAsia X
Given the investment horizon of 90 days Microsoft is expected to generate 2.49 times less return on investment than AirAsia X. But when comparing it to its historical volatility, Microsoft is 2.76 times less risky than AirAsia X. It trades about 0.1 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 Against |
| Strength | Insignificant |
| Accuracy | 97.78% |
| Values | Daily Returns |
Microsoft vs. AirAsia X Bhd
Performance |
| Timeline |
| Microsoft |
| AirAsia X Bhd |
Microsoft and AirAsia X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and AirAsia X
The main advantage of trading using opposite Microsoft and AirAsia X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
| 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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