Correlation Between Airports and International Network

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

Diversification Opportunities for Airports and International Network

0.35

Correlation Coefficient

Airports  International Network

Weak diversification

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

Pair Corralation between Airports and International Network

Assuming the 90 days trading horizon Airports of Thailand is expected to generate 0.65 times more return on investment than International Network. However, Airports of Thailand is 1.53 times less risky than International Network. It trades about -0.14 of its potential returns per unit of risk. International Network System is currently generating about -0.12 per unit of risk. If you would invest  7,070  in Airports of Thailand on October 25, 2024 and sell it today you would lose (1,245) from holding Airports of Thailand or give up 17.61% of portfolio value over 90 days.

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

Airports of Thailand  vs.  International Network System

Airports of Thailand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Airports of Thailand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

International Network

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Network System 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 forward-looking signals 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 Airports and International Network

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

The idea behind Airports of Thailand and International Network System 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.