Correlation Between Air Asia and Chong Hong

Can any of the company-specific risk be diversified away by investing in both Air Asia and Chong Hong 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 Air Asia and Chong Hong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Air Asia Co and Chong Hong Construction, you can compare the effects of market volatilities on Air Asia and Chong Hong 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 Air Asia with a short position of Chong Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Asia and Chong Hong.

Diversification Opportunities for Air Asia and Chong Hong

0.44

Correlation Coefficient

Air Asia  Chong Hong

Very weak diversification

The 3 months correlation between Air and Chong is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Air Asia Co and Chong Hong Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chong Hong Construction and Air Asia 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 Air Asia Co are associated (or correlated) with Chong Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chong Hong Construction has no effect on the direction of Air Asia i.e., Air Asia and Chong Hong go up and down completely randomly.

Pair Corralation between Air Asia and Chong Hong

Assuming the 90 days trading horizon Air Asia Co is expected to generate 0.94 times more return on investment than Chong Hong. However, Air Asia Co is 1.06 times less risky than Chong Hong. It trades about 0.01 of its potential returns per unit of risk. Chong Hong Construction is currently generating about -0.11 per unit of risk. If you would invest  3,200  in Air Asia Co on September 13, 2024 and sell it today you would earn a total of  20.00  from holding Air Asia Co or generate 0.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Air Asia Co  vs.  Chong Hong Construction

Air Asia

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Asia Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Air Asia is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chong Hong Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chong Hong Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Air Asia and Chong Hong

The main advantage of trading using opposite Air Asia and Chong Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Asia position performs unexpectedly, Chong Hong 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 Chong Hong will offset losses from the drop in Chong Hong's long position.

The idea behind Air Asia Co and Chong Hong Construction 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.