Correlation Between Bangkok Airways and Asia Aviation

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

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

Diversification Opportunities for Bangkok Airways and Asia Aviation

0.75

Correlation Coefficient

Bangkok Airways  Asia Aviation

Poor diversification

The 3 months correlation between Bangkok and Asia is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bangkok Airways Public and Asia Aviation Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Aviation Public and Bangkok Airways 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 Bangkok Airways Public are associated (or correlated) with Asia Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Aviation Public has no effect on the direction of Bangkok Airways i.e., Bangkok Airways and Asia Aviation go up and down completely randomly.

Pair Corralation between Bangkok Airways and Asia Aviation

Assuming the 90 days horizon Bangkok Airways is expected to generate 2.63 times less return on investment than Asia Aviation. In addition to that, Bangkok Airways is 1.02 times more volatile than Asia Aviation Public. It trades about 0.03 of its total potential returns per unit of risk. Asia Aviation Public is currently generating about 0.08 per unit of volatility. If you would invest  256.00  in Asia Aviation Public on September 13, 2024 and sell it today you would earn a total of  24.00  from holding Asia Aviation Public or generate 9.38% return on investment over 90 days.

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

Bangkok Airways Public  vs.  Asia Aviation Public

Bangkok Airways Public

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bangkok Airways Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Bangkok Airways is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Asia Aviation Public

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Aviation Public are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Asia Aviation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bangkok Airways and Asia Aviation

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

The idea behind Bangkok Airways Public and Asia Aviation 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.