Correlation Between Aeroports and Flughafen Zürich

Can any of the company-specific risk be diversified away by investing in both Aeroports and Flughafen Zürich 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 Aeroports and Flughafen Zürich into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aeroports de Paris and Flughafen Zrich AG, you can compare the effects of market volatilities on Aeroports and Flughafen Zürich 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 Aeroports with a short position of Flughafen Zürich. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeroports and Flughafen Zürich.

Diversification Opportunities for Aeroports and Flughafen Zürich

0.34

Correlation Coefficient

Aeroports  Flughafen Zürich

Weak diversification

The 3 months correlation between Aeroports and Flughafen is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Aeroports de Paris and Flughafen Zrich AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flughafen Zrich AG and Aeroports 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 Aeroports de Paris are associated (or correlated) with Flughafen Zürich. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flughafen Zrich AG has no effect on the direction of Aeroports i.e., Aeroports and Flughafen Zürich go up and down completely randomly.

Pair Corralation between Aeroports and Flughafen Zürich

Assuming the 90 days horizon Aeroports de Paris is expected to under-perform the Flughafen Zürich. But the pink sheet apears to be less risky and, when comparing its historical volatility, Aeroports de Paris is 1.99 times less risky than Flughafen Zürich. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Flughafen Zrich AG is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  926.00  in Flughafen Zrich AG on August 31, 2024 and sell it today you would lose (40.00) from holding Flughafen Zrich AG or give up 4.32% of portfolio value over 90 days.

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

Aeroports de Paris  vs.  Flughafen Zrich AG

Aeroports de Paris

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeroports de Paris has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Aeroports is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Flughafen Zrich AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flughafen Zrich AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Flughafen Zürich is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aeroports and Flughafen Zürich

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

The idea behind Aeroports de Paris and Flughafen Zrich AG 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.