Correlation Between TMP Steel and Air Asia

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

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

Diversification Opportunities for TMP Steel and Air Asia

-0.01

Correlation Coefficient

TMP Steel  Air Asia

Good diversification

The 3 months correlation between TMP and Air is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding TMP Steel and Air Asia Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Asia and TMP Steel 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 TMP Steel 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 TMP Steel i.e., TMP Steel and Air Asia go up and down completely randomly.

Pair Corralation between TMP Steel and Air Asia

Assuming the 90 days trading horizon TMP Steel is expected to under-perform the Air Asia. But the stock apears to be less risky and, when comparing its historical volatility, TMP Steel is 5.17 times less risky than Air Asia. The stock trades about -0.39 of its potential returns per unit of risk. The Air Asia Co is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  3,250  in Air Asia Co on October 8, 2024 and sell it today you would earn a total of  655.00  from holding Air Asia Co or generate 20.15% return on investment over 90 days.

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

TMP Steel  vs.  Air Asia Co

TMP Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TMP Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Air Asia

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Asia Co are ranked lower than 8 (%) 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 TMP Steel and Air Asia

The main advantage of trading using opposite TMP Steel and Air Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMP Steel 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 TMP Steel 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.