Correlation Between Airports and Bangkok Airways

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

Diversification Opportunities for Airports and Bangkok Airways

0.01

Correlation Coefficient

Airports  Bangkok Airways

Significant diversification

The 3 months correlation between Airports and Bangkok is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and Bangkok Airways Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangkok Airways Public 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 Bangkok Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangkok Airways Public has no effect on the direction of Airports i.e., Airports and Bangkok Airways go up and down completely randomly.

Pair Corralation between Airports and Bangkok Airways

Assuming the 90 days trading horizon Airports of Thailand is expected to under-perform the Bangkok Airways. But the stock apears to be less risky and, when comparing its historical volatility, Airports of Thailand is 2.16 times less risky than Bangkok Airways. The stock trades about 0.0 of its potential returns per unit of risk. The Bangkok Airways Public is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,230  in Bangkok Airways Public on September 5, 2024 and sell it today you would earn a total of  140.00  from holding Bangkok Airways Public or generate 6.28% return on investment over 90 days.

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

Airports of Thailand  vs.  Bangkok Airways Public

Airports of Thailand

Risk-Adjusted Performance

0 of 100

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 quite persistent basic indicators, Airports is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Bangkok Airways Public

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bangkok Airways Public are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Bangkok Airways may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Airports and Bangkok Airways

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

The idea behind Airports of Thailand and Bangkok Airways Public 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.