Correlation Between Melewar Industrial and AirAsia X

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

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

Diversification Opportunities for Melewar Industrial and AirAsia X

-0.1

Correlation Coefficient

Melewar Industrial  AirAsia X

Good diversification

The 3 months correlation between Melewar and AirAsia is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Melewar Industrial Group 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 Melewar Industrial 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 Melewar Industrial Group 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 Melewar Industrial i.e., Melewar Industrial and AirAsia X go up and down completely randomly.

Pair Corralation between Melewar Industrial and AirAsia X

Assuming the 90 days trading horizon Melewar Industrial Group is expected to under-perform the AirAsia X. But the stock apears to be less risky and, when comparing its historical volatility, Melewar Industrial Group is 1.07 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 0.0 of returns per unit of risk over similar time horizon. If you would invest  186.00  in AirAsia X Bhd on October 22, 2024 and sell it today you would lose (3.00) from holding AirAsia X Bhd or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Melewar Industrial Group  vs.  AirAsia X Bhd

Melewar Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melewar Industrial Group 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.

AirAsia X Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Melewar Industrial and AirAsia X

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

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.