Correlation Between Provision Information and Air Asia

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Can any of the company-specific risk be diversified away by investing in both Provision Information 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 Provision Information and Air Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Provision Information CoLtd and Air Asia Co, you can compare the effects of market volatilities on Provision Information 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 Provision Information with a short position of Air Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Provision Information and Air Asia.

Diversification Opportunities for Provision Information and Air Asia

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Provision and Air is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Provision Information CoLtd and Air Asia Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Asia and Provision Information 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 Provision Information CoLtd 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 Provision Information i.e., Provision Information and Air Asia go up and down completely randomly.

Pair Corralation between Provision Information and Air Asia

Assuming the 90 days trading horizon Provision Information CoLtd is expected to generate 0.54 times more return on investment than Air Asia. However, Provision Information CoLtd is 1.85 times less risky than Air Asia. It trades about -0.03 of its potential returns per unit of risk. Air Asia Co is currently generating about -0.03 per unit of risk. If you would invest  8,987  in Provision Information CoLtd on October 24, 2024 and sell it today you would lose (1,587) from holding Provision Information CoLtd or give up 17.66% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Provision Information CoLtd  vs.  Air Asia Co

 Performance 
       Timeline  
Provision Information 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Provision Information CoLtd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Provision Information is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Air Asia 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
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.

Provision Information and Air Asia Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Provision Information and Air Asia

The main advantage of trading using opposite Provision Information and Air Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provision Information 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 Provision Information CoLtd 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.
Check out your portfolio center.
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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