Correlation Between Asia Aviation and CK Power

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

By analyzing existing cross correlation between Asia Aviation Public and CK Power Public, you can compare the effects of market volatilities on Asia Aviation and CK Power 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 Asia Aviation with a short position of CK Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Aviation and CK Power.

Diversification Opportunities for Asia Aviation and CK Power

-0.24

Correlation Coefficient

Asia Aviation  CK Power

Very good diversification

The 3 months correlation between Asia and CKP is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Asia Aviation Public and CK Power Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CK Power Public and Asia Aviation 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 Asia Aviation Public are associated (or correlated) with CK Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CK Power Public has no effect on the direction of Asia Aviation i.e., Asia Aviation and CK Power go up and down completely randomly.

Pair Corralation between Asia Aviation and CK Power

Assuming the 90 days trading horizon Asia Aviation Public is expected to generate 1.28 times more return on investment than CK Power. However, Asia Aviation is 1.28 times more volatile than CK Power Public. It trades about 0.11 of its potential returns per unit of risk. CK Power Public is currently generating about -0.1 per unit of risk. If you would invest  248.00  in Asia Aviation Public on September 5, 2024 and sell it today you would earn a total of  38.00  from holding Asia Aviation Public or generate 15.32% return on investment over 90 days.

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

Asia Aviation Public  vs.  CK Power Public

Asia Aviation Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Aviation Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Asia Aviation disclosed solid returns over the last few months and may actually be approaching a breakup point.

CK Power Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CK Power Public 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.

Pair Trading with Asia Aviation and CK Power

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

The idea behind Asia Aviation Public and CK Power Public 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..