Correlation Between Aena SME and Aeroports

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

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

Diversification Opportunities for Aena SME and Aeroports

-0.35

Correlation Coefficient

Aena SME  Aeroports

Very good diversification

The 3 months correlation between Aena and Aeroports is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Aena SME SA and Aeroports de Paris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeroports de Paris and Aena SME 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 Aena SME SA are associated (or correlated) with Aeroports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeroports de Paris has no effect on the direction of Aena SME i.e., Aena SME and Aeroports go up and down completely randomly.

Pair Corralation between Aena SME and Aeroports

Assuming the 90 days horizon Aena SME SA is expected to generate 1.37 times more return on investment than Aeroports. However, Aena SME is 1.37 times more volatile than Aeroports de Paris. It trades about 0.11 of its potential returns per unit of risk. Aeroports de Paris is currently generating about -0.13 per unit of risk. If you would invest  20,082  in Aena SME SA on August 31, 2024 and sell it today you would earn a total of  1,338  from holding Aena SME SA or generate 6.66% return on investment over 90 days.

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

Aena SME SA  vs.  Aeroports de Paris

Aena SME SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aena SME SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Aena SME may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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. In spite of fairly strong basic indicators, Aeroports is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aena SME and Aeroports

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

The idea behind Aena SME SA and Aeroports de Paris 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.