Correlation Between Aena SME and Airports

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

By analyzing existing cross correlation between Aena SME SA and Airports of Thailand, you can compare the effects of market volatilities on Aena SME and Airports 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 Aena SME with a short position of Airports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aena SME and Airports.

Diversification Opportunities for Aena SME and Airports

0.57

Correlation Coefficient

Aena SME  Airports

Very weak diversification

The 3 months correlation between Aena and Airports is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Aena SME SA and Airports of Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airports of Thailand and Aena SME 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 Aena SME SA are associated (or correlated) with Airports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airports of Thailand has no effect on the direction of Aena SME i.e., Aena SME and Airports go up and down completely randomly.

Pair Corralation between Aena SME and Airports

Assuming the 90 days horizon Aena SME is expected to generate 4.55 times less return on investment than Airports. But when comparing it to its historical volatility, Aena SME SA is 1.56 times less risky than Airports. It trades about 0.01 of its potential returns per unit of risk. Airports of Thailand is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  163.00  in Airports of Thailand on August 31, 2024 and sell it today you would earn a total of  1.00  from holding Airports of Thailand or generate 0.61% return on investment over 90 days.

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

Aena SME SA  vs.  Airports of Thailand

Aena SME SA

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aena SME SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aena SME may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 fragile basic indicators, Airports may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Aena SME and Airports

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

The idea behind Aena SME SA and Airports of Thailand 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.