Correlation Between Auckland International and Airports

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

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

Diversification Opportunities for Auckland International and Airports

0.61

Correlation Coefficient

Auckland International  Airports

Poor diversification

The 3 months correlation between Auckland and Airports is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Auckland International Airport 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 Auckland International 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 Auckland International Airport 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 Auckland International i.e., Auckland International and Airports go up and down completely randomly.

Pair Corralation between Auckland International and Airports

Assuming the 90 days horizon Auckland International Airport is expected to under-perform the Airports. But the pink sheet apears to be less risky and, when comparing its historical volatility, Auckland International Airport is 2.57 times less risky than Airports. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Airports of Thailand is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  131.00  in Airports of Thailand on August 31, 2024 and sell it today you would lose (6.00) from holding Airports of Thailand or give up 4.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Auckland International Airport  vs.  Airports of Thailand

Auckland International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auckland International Airport has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Auckland International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Airports of Thailand

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Airports of Thailand are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Airports reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Auckland International and Airports

The main advantage of trading using opposite Auckland International and Airports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auckland International 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 Auckland International Airport 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.