Correlation Between AirAsia X and EA Technique

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

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

Diversification Opportunities for AirAsia X and EA Technique

0.04

Correlation Coefficient

AirAsia X  EA Technique

Significant diversification

The 3 months correlation between AirAsia and 5259 is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding AirAsia X Bhd and EA Technique M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Technique M and AirAsia X 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 AirAsia X Bhd are associated (or correlated) with EA Technique. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Technique M has no effect on the direction of AirAsia X i.e., AirAsia X and EA Technique go up and down completely randomly.

Pair Corralation between AirAsia X and EA Technique

Assuming the 90 days trading horizon AirAsia X Bhd is expected to generate 1.8 times more return on investment than EA Technique. However, AirAsia X is 1.8 times more volatile than EA Technique M. It trades about 0.21 of its potential returns per unit of risk. EA Technique M is currently generating about 0.04 per unit of risk. If you would invest  131.00  in AirAsia X Bhd on September 4, 2024 and sell it today you would earn a total of  61.00  from holding AirAsia X Bhd or generate 46.56% return on investment over 90 days.

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

AirAsia X Bhd  vs.  EA Technique M

AirAsia X Bhd

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AirAsia X Bhd are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, AirAsia X disclosed solid returns over the last few months and may actually be approaching a breakup point.

EA Technique M

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EA Technique M are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, EA Technique 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 AirAsia X and EA Technique

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

The idea behind AirAsia X Bhd and EA Technique M 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.