Correlation Between Airports and Japan Airport

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

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

Diversification Opportunities for Airports and Japan Airport

0.82

Correlation Coefficient

Airports  Japan Airport

Very poor diversification

The 3 months correlation between Airports and Japan is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and Japan Airport Terminal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Airport Terminal and Airports 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 Airports of Thailand are associated (or correlated) with Japan Airport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Airport Terminal has no effect on the direction of Airports i.e., Airports and Japan Airport go up and down completely randomly.

Pair Corralation between Airports and Japan Airport

Assuming the 90 days horizon Airports of Thailand is expected to generate 2.51 times more return on investment than Japan Airport. However, Airports is 2.51 times more volatile than Japan Airport Terminal. It trades about 0.16 of its potential returns per unit of risk. Japan Airport Terminal is currently generating about 0.07 per unit of risk. If you would invest  164.00  in Airports of Thailand on August 31, 2024 and sell it today you would earn a total of  36.00  from holding Airports of Thailand or generate 21.95% return on investment over 90 days.

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

Airports of Thailand  vs.  Japan Airport Terminal

Airports of Thailand

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Airports of Thailand are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Airports reported solid returns over the last few months and may actually be approaching a breakup point.

Japan Airport Terminal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Airport Terminal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Japan Airport is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Airports and Japan Airport

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

The idea behind Airports of Thailand and Japan Airport Terminal 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.