Correlation Between CP ALL and Airports

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

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

Diversification Opportunities for CP ALL and Airports

0.17

Correlation Coefficient

CP ALL  Airports

Average diversification

The 3 months correlation between CPALL and Airports is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding CP ALL Public 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 CP ALL 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 CP ALL Public 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 CP ALL i.e., CP ALL and Airports go up and down completely randomly.

Pair Corralation between CP ALL and Airports

Assuming the 90 days trading horizon CP ALL is expected to generate 120.68 times less return on investment than Airports. But when comparing it to its historical volatility, CP ALL Public is 65.56 times less risky than Airports. It trades about 0.04 of its potential returns per unit of risk. Airports of Thailand is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,070  in Airports of Thailand on September 15, 2024 and sell it today you would lose (945.00) from holding Airports of Thailand or give up 13.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.62%
Values	Daily Returns

CP ALL Public  vs.  Airports of Thailand

CP ALL Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CP ALL Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, CP ALL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Airports of Thailand

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Airports of Thailand are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Airports sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CP ALL and Airports

The main advantage of trading using opposite CP ALL and Airports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CP ALL 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 CP ALL Public 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.