Correlation Between Airports and Dexon Technology

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

Diversification Opportunities for Airports and Dexon Technology

0.12

Correlation Coefficient

Airports  Dexon Technology

Average diversification

The 3 months correlation between Airports and Dexon is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and Dexon Technology PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dexon Technology PCL 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 Dexon Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dexon Technology PCL has no effect on the direction of Airports i.e., Airports and Dexon Technology go up and down completely randomly.

Pair Corralation between Airports and Dexon Technology

Assuming the 90 days trading horizon Airports of Thailand is expected to under-perform the Dexon Technology. In addition to that, Airports is 1.37 times more volatile than Dexon Technology PCL. It trades about -0.16 of its total potential returns per unit of risk. Dexon Technology PCL is currently generating about -0.07 per unit of volatility. If you would invest  163.00  in Dexon Technology PCL on September 5, 2024 and sell it today you would lose (7.00) from holding Dexon Technology PCL or give up 4.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Airports of Thailand  vs.  Dexon Technology PCL

Airports of Thailand

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Airports of Thailand are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Airports sustained solid returns over the last few months and may actually be approaching a breakup point.

Dexon Technology PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dexon Technology PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Dexon Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Airports and Dexon Technology

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

The idea behind Airports of Thailand and Dexon Technology 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 Global Correlations module to find global opportunities by holding instruments from different markets.