Correlation Between Asia Aviation and Thai Capital

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

By analyzing existing cross correlation between Asia Aviation Public and Thai Capital, you can compare the effects of market volatilities on Asia Aviation and Thai Capital 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 Asia Aviation with a short position of Thai Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Aviation and Thai Capital.

Diversification Opportunities for Asia Aviation and Thai Capital

0.73

Correlation Coefficient

Asia Aviation  Thai Capital

Poor diversification

The 3 months correlation between Asia and Thai is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Asia Aviation Public and Thai Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Capital and Asia Aviation 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 Asia Aviation Public are associated (or correlated) with Thai Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Capital has no effect on the direction of Asia Aviation i.e., Asia Aviation and Thai Capital go up and down completely randomly.

Pair Corralation between Asia Aviation and Thai Capital

Assuming the 90 days trading horizon Asia Aviation Public is expected to generate 0.51 times more return on investment than Thai Capital. However, Asia Aviation Public is 1.98 times less risky than Thai Capital. It trades about 0.11 of its potential returns per unit of risk. Thai Capital is currently generating about -0.01 per unit of risk. If you would invest  248.00  in Asia Aviation Public on September 5, 2024 and sell it today you would earn a total of  36.00  from holding Asia Aviation Public or generate 14.52% return on investment over 90 days.

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

Asia Aviation Public  vs.  Thai Capital

Asia Aviation Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Aviation Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Asia Aviation disclosed solid returns over the last few months and may actually be approaching a breakup point.

Thai Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Thai Capital is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Asia Aviation and Thai Capital

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

The idea behind Asia Aviation Public and Thai Capital 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.