Correlation Between Asia Aviation and Asian Insulators

Can any of the company-specific risk be diversified away by investing in both Asia Aviation and Asian Insulators 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 Asian Insulators 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 Asian Insulators PCL, you can compare the effects of market volatilities on Asia Aviation and Asian Insulators 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 Asian Insulators. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Aviation and Asian Insulators.

Diversification Opportunities for Asia Aviation and Asian Insulators

0.74

Correlation Coefficient

Asia Aviation  Asian Insulators

Poor diversification

The 3 months correlation between Asia and Asian is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Asia Aviation Public and Asian Insulators PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asian Insulators PCL 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 Asian Insulators. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asian Insulators PCL has no effect on the direction of Asia Aviation i.e., Asia Aviation and Asian Insulators go up and down completely randomly.

Pair Corralation between Asia Aviation and Asian Insulators

Assuming the 90 days trading horizon Asia Aviation Public is expected to under-perform the Asian Insulators. In addition to that, Asia Aviation is 1.94 times more volatile than Asian Insulators PCL. It trades about -0.2 of its total potential returns per unit of risk. Asian Insulators PCL is currently generating about -0.22 per unit of volatility. If you would invest  394.00  in Asian Insulators PCL on October 26, 2024 and sell it today you would lose (48.00) from holding Asian Insulators PCL or give up 12.18% of portfolio value over 90 days.

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

Asia Aviation Public  vs.  Asian Insulators PCL

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 conflicting performance in the last few months, the Stock's basic 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.

Asian Insulators PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asian Insulators PCL 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 fundamental drivers 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 Asian Insulators

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

The idea behind Asia Aviation Public and Asian Insulators PCL 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.