Correlation Between Aeroports and Airports

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

By analyzing existing cross correlation between Aeroports de Paris and Airports of Thailand, you can compare the effects of market volatilities on Aeroports and Airports 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 Aeroports with a short position of Airports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeroports and Airports.

Diversification Opportunities for Aeroports and Airports

0.26

Correlation Coefficient

Aeroports  Airports

Modest diversification

The 3 months correlation between Aeroports and Airports is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aeroports de Paris and Airports of Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airports of Thailand and Aeroports 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 Aeroports de Paris are associated (or correlated) with Airports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airports of Thailand has no effect on the direction of Aeroports i.e., Aeroports and Airports go up and down completely randomly.

Pair Corralation between Aeroports and Airports

Assuming the 90 days horizon Aeroports de Paris is expected to under-perform the Airports. But the pink sheet apears to be less risky and, when comparing its historical volatility, Aeroports de Paris is 5.24 times less risky than Airports. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Airports of Thailand is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  131.00  in Airports of Thailand on September 3, 2024 and sell it today you would earn a total of  54.00  from holding Airports of Thailand or generate 41.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Aeroports de Paris  vs.  Airports of Thailand

Aeroports de Paris

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeroports de Paris has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Airports of Thailand

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Airports of Thailand are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Airports reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aeroports and Airports

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

The idea behind Aeroports de Paris and Airports of Thailand 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.