Correlation Between Airports and LH Shopping

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

Diversification Opportunities for Airports and LH Shopping

-0.21

Correlation Coefficient

Airports  LH Shopping

Very good diversification

The 3 months correlation between Airports and LHSC is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and LH Shopping Centers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LH Shopping Centers 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 LH Shopping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LH Shopping Centers has no effect on the direction of Airports i.e., Airports and LH Shopping go up and down completely randomly.

Pair Corralation between Airports and LH Shopping

Assuming the 90 days trading horizon Airports is expected to generate 41.07 times less return on investment than LH Shopping. But when comparing it to its historical volatility, Airports of Thailand is 1.7 times less risky than LH Shopping. It trades about 0.01 of its potential returns per unit of risk. LH Shopping Centers is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  981.00  in LH Shopping Centers on September 13, 2024 and sell it today you would earn a total of  139.00  from holding LH Shopping Centers or generate 14.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Airports of Thailand  vs.  LH Shopping Centers

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.

LH Shopping Centers

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LH Shopping Centers are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, LH Shopping disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Airports and LH Shopping

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

The idea behind Airports of Thailand and LH Shopping Centers 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.