Correlation Between Airports and Eureka Design

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

Diversification Opportunities for Airports and Eureka Design

0.45

Correlation Coefficient

Airports  Eureka Design

Very weak diversification

The 3 months correlation between Airports and Eureka is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and Eureka Design Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eureka Design Public 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 Eureka Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eureka Design Public has no effect on the direction of Airports i.e., Airports and Eureka Design go up and down completely randomly.

Pair Corralation between Airports and Eureka Design

Assuming the 90 days trading horizon Airports of Thailand is expected to under-perform the Eureka Design. But the stock apears to be less risky and, when comparing its historical volatility, Airports of Thailand is 2.47 times less risky than Eureka Design. The stock trades about -0.01 of its potential returns per unit of risk. The Eureka Design Public is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  51.00  in Eureka Design Public on September 5, 2024 and sell it today you would earn a total of  16.00  from holding Eureka Design Public or generate 31.37% return on investment over 90 days.

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

Airports of Thailand  vs.  Eureka Design Public

Airports of Thailand

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Airports of Thailand has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Eureka Design Public

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eureka Design Public are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Eureka Design sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Airports and Eureka Design

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

The idea behind Airports of Thailand and Eureka Design Public 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.