Correlation Between MISC Bhd and AirAsia X

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

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

Diversification Opportunities for MISC Bhd and AirAsia X

-0.64

Correlation Coefficient

MISC Bhd  AirAsia X

Excellent diversification

The 3 months correlation between MISC and AirAsia is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding MISC Bhd 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 MISC Bhd 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 MISC Bhd 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 MISC Bhd i.e., MISC Bhd and AirAsia X go up and down completely randomly.

Pair Corralation between MISC Bhd and AirAsia X

Assuming the 90 days trading horizon MISC Bhd is expected to under-perform the AirAsia X. But the stock apears to be less risky and, when comparing its historical volatility, MISC Bhd is 2.61 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	Weak
Accuracy	100.0%
Values	Daily Returns

MISC Bhd  vs.  AirAsia X Bhd

MISC Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MISC Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, MISC Bhd is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the 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 MISC Bhd and AirAsia X

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

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.