Correlation Between Airports and Major Cineplex

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

Diversification Opportunities for Airports and Major Cineplex

0.04

Correlation Coefficient

Airports  Major Cineplex

Significant diversification

The 3 months correlation between Airports and Major is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and Major Cineplex Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Cineplex Group 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 Major Cineplex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Cineplex Group has no effect on the direction of Airports i.e., Airports and Major Cineplex go up and down completely randomly.

Pair Corralation between Airports and Major Cineplex

Assuming the 90 days trading horizon Airports is expected to generate 733.66 times less return on investment than Major Cineplex. But when comparing it to its historical volatility, Airports of Thailand is 166.77 times less risky than Major Cineplex. It trades about 0.04 of its potential returns per unit of risk. Major Cineplex Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,450  in Major Cineplex Group on August 31, 2024 and sell it today you would lose (40.00) from holding Major Cineplex Group or give up 2.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Airports of Thailand  vs.  Major Cineplex Group

Airports of Thailand

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Airports of Thailand are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Airports is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Major Cineplex Group

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Airports and Major Cineplex

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

The idea behind Airports of Thailand and Major Cineplex Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.