Correlation Between ASIA Capital and Asia Aviation

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

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

Diversification Opportunities for ASIA Capital and Asia Aviation

0.0

Correlation Coefficient

ASIA Capital  Asia Aviation

Pay attention - limited upside

The 3 months correlation between ASIA and Asia is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ASIA Capital Group and Asia Aviation Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Aviation Public and ASIA Capital 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 Capital Group are associated (or correlated) with Asia Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Aviation Public has no effect on the direction of ASIA Capital i.e., ASIA Capital and Asia Aviation go up and down completely randomly.

Pair Corralation between ASIA Capital and Asia Aviation

Assuming the 90 days trading horizon ASIA Capital Group is expected to generate 64.65 times more return on investment than Asia Aviation. However, ASIA Capital is 64.65 times more volatile than Asia Aviation Public. It trades about 0.1 of its potential returns per unit of risk. Asia Aviation Public is currently generating about 0.05 per unit of risk. If you would invest  33.00  in ASIA Capital Group on September 14, 2024 and sell it today you would lose (33.00) from holding ASIA Capital Group or give up 100.0% of portfolio value over 90 days.

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

ASIA Capital Group  vs.  Asia Aviation Public

ASIA Capital Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASIA Capital Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, ASIA Capital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Asia Aviation Public

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Aviation Public are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Asia Aviation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ASIA Capital and Asia Aviation

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

The idea behind ASIA Capital Group and Asia Aviation 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.