Correlation Between Melewar Industrial and AirAsia X

Can any of the company-specific risk be diversified away by investing in both Melewar Industrial 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 Melewar Industrial and AirAsia X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Melewar Industrial Group and AirAsia X Bhd, you can compare the effects of market volatilities on Melewar Industrial 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 Melewar Industrial with a short position of AirAsia X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melewar Industrial and AirAsia X.

Diversification Opportunities for Melewar Industrial and AirAsia X

-0.54

Correlation Coefficient

Melewar Industrial  AirAsia X

Excellent diversification

The 3 months correlation between Melewar and AirAsia is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Melewar Industrial Group 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 Melewar Industrial 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 Melewar Industrial Group 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 Melewar Industrial i.e., Melewar Industrial and AirAsia X go up and down completely randomly.

Pair Corralation between Melewar Industrial and AirAsia X

Assuming the 90 days trading horizon Melewar Industrial Group is expected to under-perform the AirAsia X. But the stock apears to be less risky and, when comparing its historical volatility, Melewar Industrial Group is 1.38 times less risky than AirAsia X. The stock trades about -0.05 of its potential returns per unit of risk. The AirAsia X Bhd is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  131.00  in AirAsia X Bhd on September 12, 2024 and sell it today you would earn a total of  61.00  from holding AirAsia X Bhd or generate 46.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Melewar Industrial Group  vs.  AirAsia X Bhd

Melewar Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melewar Industrial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

AirAsia X Bhd

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AirAsia X Bhd are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, AirAsia X disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Melewar Industrial and AirAsia X

The main advantage of trading using opposite Melewar Industrial and AirAsia X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melewar Industrial 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.

The idea behind Melewar Industrial Group and AirAsia X Bhd 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.