Correlation Between Air Asia and Hi Sharp

Can any of the company-specific risk be diversified away by investing in both Air Asia and Hi Sharp 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 Hi Sharp 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 Hi Sharp Electronics, you can compare the effects of market volatilities on Air Asia and Hi Sharp 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 Hi Sharp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Asia and Hi Sharp.

Diversification Opportunities for Air Asia and Hi Sharp

-0.17

Correlation Coefficient

Air Asia  Hi Sharp

Good diversification

The 3 months correlation between Air and 3128 is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Air Asia Co and Hi Sharp Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Sharp Electronics 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 Hi Sharp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Sharp Electronics has no effect on the direction of Air Asia i.e., Air Asia and Hi Sharp go up and down completely randomly.

Pair Corralation between Air Asia and Hi Sharp

Assuming the 90 days trading horizon Air Asia Co is expected to generate 1.42 times more return on investment than Hi Sharp. However, Air Asia is 1.42 times more volatile than Hi Sharp Electronics. It trades about 0.07 of its potential returns per unit of risk. Hi Sharp Electronics is currently generating about -0.03 per unit of risk. If you would invest  1,537  in Air Asia Co on October 23, 2024 and sell it today you would earn a total of  2,168  from holding Air Asia Co or generate 141.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Air Asia Co  vs.  Hi Sharp Electronics

Air Asia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Asia Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Air Asia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hi Sharp Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hi Sharp Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hi Sharp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Air Asia and Hi Sharp

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

The idea behind Air Asia Co and Hi Sharp Electronics 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.