Correlation Between Airports and Beauty Community

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

Diversification Opportunities for Airports and Beauty Community

0.66

Correlation Coefficient

Airports  Beauty Community

Poor diversification

The 3 months correlation between Airports and Beauty is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and Beauty Community Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beauty Community 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 Beauty Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beauty Community Public has no effect on the direction of Airports i.e., Airports and Beauty Community go up and down completely randomly.

Pair Corralation between Airports and Beauty Community

Assuming the 90 days trading horizon Airports of Thailand is expected to generate 0.42 times more return on investment than Beauty Community. However, Airports of Thailand is 2.35 times less risky than Beauty Community. It trades about 0.01 of its potential returns per unit of risk. Beauty Community Public is currently generating about -0.19 per unit of risk. If you would invest  6,146  in Airports of Thailand on September 13, 2024 and sell it today you would earn a total of  4.00  from holding Airports of Thailand or generate 0.07% return on investment over 90 days.

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

Airports of Thailand  vs.  Beauty Community 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.

Beauty Community Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beauty Community Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Airports and Beauty Community

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

The idea behind Airports of Thailand and Beauty Community 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.