Correlation Between Airports and Royal Plus

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

Diversification Opportunities for Airports and Royal Plus

0.16

Correlation Coefficient

Airports  Royal Plus

Average diversification

The 3 months correlation between Airports and Royal is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and Royal Plus PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Plus 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 Royal Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Plus PCL has no effect on the direction of Airports i.e., Airports and Royal Plus go up and down completely randomly.

Pair Corralation between Airports and Royal Plus

Assuming the 90 days trading horizon Airports of Thailand is expected to under-perform the Royal Plus. But the stock apears to be less risky and, when comparing its historical volatility, Airports of Thailand is 1.22 times less risky than Royal Plus. The stock trades about -0.23 of its potential returns per unit of risk. The Royal Plus PCL is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  520.00  in Royal Plus PCL on December 2, 2024 and sell it today you would lose (74.00) from holding Royal Plus PCL or give up 14.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Airports of Thailand  vs.  Royal Plus PCL

Airports of Thailand

Risk-Adjusted Performance

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 basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Royal Plus PCL

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royal Plus PCL 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 forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Airports and Royal Plus

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

The idea behind Airports of Thailand and Royal Plus 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.