Correlation Between Airports and Aena SME

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

Diversification Opportunities for Airports and Aena SME

0.54

Correlation Coefficient

Airports  Aena SME

Very weak diversification

The 3 months correlation between Airports and Aena is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and Aena SME SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aena SME SA 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 Aena SME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aena SME SA has no effect on the direction of Airports i.e., Airports and Aena SME go up and down completely randomly.

Pair Corralation between Airports and Aena SME

Assuming the 90 days trading horizon Airports of Thailand is expected to under-perform the Aena SME. In addition to that, Airports is 1.25 times more volatile than Aena SME SA. It trades about -0.09 of its total potential returns per unit of risk. Aena SME SA is currently generating about 0.14 per unit of volatility. If you would invest  19,690  in Aena SME SA on September 4, 2024 and sell it today you would earn a total of  1,130  from holding Aena SME SA or generate 5.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

Airports of Thailand  vs.  Aena SME SA

Airports of Thailand

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Airports of Thailand are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Airports is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Aena SME SA

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aena SME SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Aena SME reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Airports and Aena SME

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

The idea behind Airports of Thailand and Aena SME SA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.