Correlation Between Asia Aviation and Asia Green

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

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

Diversification Opportunities for Asia Aviation and Asia Green

-0.27

Correlation Coefficient

Asia Aviation  Asia Green

Very good diversification

The 3 months correlation between Asia and Asia is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Asia Aviation Public and Asia Green Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Green Energy and Asia Aviation 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 Asia Aviation Public are associated (or correlated) with Asia Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Green Energy has no effect on the direction of Asia Aviation i.e., Asia Aviation and Asia Green go up and down completely randomly.

Pair Corralation between Asia Aviation and Asia Green

Assuming the 90 days trading horizon Asia Aviation Public is expected to generate 1.55 times more return on investment than Asia Green. However, Asia Aviation is 1.55 times more volatile than Asia Green Energy. It trades about -0.2 of its potential returns per unit of risk. Asia Green Energy is currently generating about -0.43 per unit of risk. If you would invest  280.00  in Asia Aviation Public on October 11, 2024 and sell it today you would lose (22.00) from holding Asia Aviation Public or give up 7.86% of portfolio value over 90 days.

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

Asia Aviation Public  vs.  Asia Green Energy

Asia Aviation Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Aviation Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Asia Aviation is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Asia Green Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Green Energy 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 technical and fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Asia Aviation and Asia Green

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

The idea behind Asia Aviation Public and Asia Green Energy 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.