Correlation Between Air Asia and Cayenne Entertainment

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

Diversification Opportunities for Air Asia and Cayenne Entertainment

-0.03

Correlation Coefficient

Air Asia  Cayenne Entertainment

Good diversification

The 3 months correlation between Air and Cayenne is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Air Asia Co and Cayenne Entertainment Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cayenne Entertainment 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 Cayenne Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cayenne Entertainment has no effect on the direction of Air Asia i.e., Air Asia and Cayenne Entertainment go up and down completely randomly.

Pair Corralation between Air Asia and Cayenne Entertainment

Assuming the 90 days trading horizon Air Asia is expected to generate 16.01 times less return on investment than Cayenne Entertainment. But when comparing it to its historical volatility, Air Asia Co is 20.51 times less risky than Cayenne Entertainment. It trades about 0.07 of its potential returns per unit of risk. Cayenne Entertainment Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,905  in Cayenne Entertainment Technology on October 10, 2024 and sell it today you would lose (2,995) from holding Cayenne Entertainment Technology or give up 43.37% of portfolio value over 90 days.

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

Air Asia Co  vs.  Cayenne Entertainment Technolo

Air Asia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Asia Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Air Asia showed solid returns over the last few months and may actually be approaching a breakup point.

Cayenne Entertainment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cayenne Entertainment Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Cayenne Entertainment 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 Cayenne Entertainment

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

The idea behind Air Asia Co and Cayenne Entertainment Technology 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .