Correlation Between Airports and AerCap Holdings

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

Diversification Opportunities for Airports and AerCap Holdings

-0.4

Correlation Coefficient

Airports  AerCap Holdings

Very good diversification

The 3 months correlation between Airports and AerCap is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and AerCap Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerCap Holdings NV 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 AerCap Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerCap Holdings NV has no effect on the direction of Airports i.e., Airports and AerCap Holdings go up and down completely randomly.

Pair Corralation between Airports and AerCap Holdings

Assuming the 90 days trading horizon Airports of Thailand is expected to under-perform the AerCap Holdings. In addition to that, Airports is 2.95 times more volatile than AerCap Holdings NV. It trades about -0.15 of its total potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.05 per unit of volatility. If you would invest  9,033  in AerCap Holdings NV on December 30, 2024 and sell it today you would earn a total of  377.00  from holding AerCap Holdings NV or generate 4.17% return on investment over 90 days.

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

Airports of Thailand  vs.  AerCap Holdings NV

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AerCap Holdings NV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AerCap Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Airports and AerCap Holdings

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

The idea behind Airports of Thailand and AerCap Holdings NV 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.