Correlation Between AirAsia X and Impiana Hotels

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

Diversification Opportunities for AirAsia X and Impiana Hotels

0.05

Correlation Coefficient

AirAsia X  Impiana Hotels

Significant diversification

The 3 months correlation between AirAsia and Impiana is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding AirAsia X Bhd and Impiana Hotels Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impiana Hotels 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 Impiana Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impiana Hotels Bhd has no effect on the direction of AirAsia X i.e., AirAsia X and Impiana Hotels go up and down completely randomly.

Pair Corralation between AirAsia X and Impiana Hotels

Assuming the 90 days trading horizon AirAsia X Bhd is expected to under-perform the Impiana Hotels. But the stock apears to be less risky and, when comparing its historical volatility, AirAsia X Bhd is 1.18 times less risky than Impiana Hotels. The stock trades about -0.18 of its potential returns per unit of risk. The Impiana Hotels Bhd is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Impiana Hotels Bhd on December 25, 2024 and sell it today you would earn a total of  3.00  from holding Impiana Hotels Bhd or generate 13.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

AirAsia X Bhd  vs.  Impiana Hotels Bhd

AirAsia X Bhd

Risk-Adjusted Performance

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 conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Impiana Hotels Bhd

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Impiana Hotels Bhd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Impiana Hotels disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AirAsia X and Impiana Hotels

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

The idea behind AirAsia X Bhd and Impiana Hotels 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.