Correlation Between AirAsia X and Duopharma Biotech

Can any of the company-specific risk be diversified away by investing in both AirAsia X and Duopharma Biotech 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 Duopharma Biotech 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 Duopharma Biotech Bhd, you can compare the effects of market volatilities on AirAsia X and Duopharma Biotech 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 Duopharma Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of AirAsia X and Duopharma Biotech.

Diversification Opportunities for AirAsia X and Duopharma Biotech

0.2

Correlation Coefficient

AirAsia X  Duopharma Biotech

Modest diversification

The 3 months correlation between AirAsia and Duopharma is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding AirAsia X Bhd and Duopharma Biotech Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duopharma Biotech Bhd 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 Duopharma Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duopharma Biotech Bhd has no effect on the direction of AirAsia X i.e., AirAsia X and Duopharma Biotech go up and down completely randomly.

Pair Corralation between AirAsia X and Duopharma Biotech

Assuming the 90 days trading horizon AirAsia X Bhd is expected to under-perform the Duopharma Biotech. In addition to that, AirAsia X is 1.68 times more volatile than Duopharma Biotech Bhd. It trades about -0.27 of its total potential returns per unit of risk. Duopharma Biotech Bhd is currently generating about -0.03 per unit of volatility. If you would invest  125.00  in Duopharma Biotech Bhd on October 25, 2024 and sell it today you would lose (1.00) from holding Duopharma Biotech Bhd or give up 0.8% of portfolio value over 90 days.

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

AirAsia X Bhd  vs.  Duopharma Biotech Bhd

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 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.

Duopharma Biotech Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duopharma Biotech Bhd 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.

Pair Trading with AirAsia X and Duopharma Biotech

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

The idea behind AirAsia X Bhd and Duopharma Biotech 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.