Correlation Between Vanguard International and Air Asia

Can any of the company-specific risk be diversified away by investing in both Vanguard International and Air Asia 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 Vanguard International and Air Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard International Semiconductor and Air Asia Co, you can compare the effects of market volatilities on Vanguard International and Air Asia 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 Vanguard International with a short position of Air Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard International and Air Asia.

Diversification Opportunities for Vanguard International and Air Asia

0.16

Correlation Coefficient

Vanguard International  Air Asia

Average diversification

The 3 months correlation between Vanguard and Air is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard International Semicon and Air Asia Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Asia and Vanguard International 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 Vanguard International Semiconductor are associated (or correlated) with Air Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Asia has no effect on the direction of Vanguard International i.e., Vanguard International and Air Asia go up and down completely randomly.

Pair Corralation between Vanguard International and Air Asia

Assuming the 90 days trading horizon Vanguard International Semiconductor is expected to generate 1.29 times more return on investment than Air Asia. However, Vanguard International is 1.29 times more volatile than Air Asia Co. It trades about 0.2 of its potential returns per unit of risk. Air Asia Co is currently generating about -0.04 per unit of risk. If you would invest  8,810  in Vanguard International Semiconductor on December 5, 2024 and sell it today you would earn a total of  890.00  from holding Vanguard International Semiconductor or generate 10.1% return on investment over 90 days.

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

Vanguard International Semicon  vs.  Air Asia Co

Vanguard International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard International Semiconductor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Vanguard International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Air Asia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Asia Co are ranked lower than 7 (%) 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.

Pair Trading with Vanguard International and Air Asia

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

The idea behind Vanguard International Semiconductor and Air Asia Co 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.