Correlation Between Aeroports and Aena SME

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

By analyzing existing cross correlation between Aeroports de Paris and Aena SME SA, you can compare the effects of market volatilities on Aeroports and Aena SME 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 Aeroports with a short position of Aena SME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeroports and Aena SME.

Diversification Opportunities for Aeroports and Aena SME

-0.54

Correlation Coefficient

Aeroports  Aena SME

Excellent diversification

The 3 months correlation between Aeroports and Aena is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Aeroports de Paris and Aena SME SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aena SME SA and Aeroports 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 Aeroports de Paris are associated (or correlated) with Aena SME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aena SME SA has no effect on the direction of Aeroports i.e., Aeroports and Aena SME go up and down completely randomly.

Pair Corralation between Aeroports and Aena SME

Assuming the 90 days horizon Aeroports de Paris is expected to under-perform the Aena SME. In addition to that, Aeroports is 1.72 times more volatile than Aena SME SA. It trades about -0.05 of its total potential returns per unit of risk. Aena SME SA is currently generating about 0.22 per unit of volatility. If you would invest  18,100  in Aena SME SA on September 3, 2024 and sell it today you would earn a total of  2,340  from holding Aena SME SA or generate 12.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aeroports de Paris  vs.  Aena SME SA

Aeroports de Paris

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeroports de Paris has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aeroports is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Aena SME SA

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aena SME SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aena SME may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aeroports and Aena SME

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

The idea behind Aeroports de Paris and Aena SME SA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.