Correlation Between Airports and AerCap Holdings
Can any of the company-specific risk be diversified away by investing in both Airports and AerCap Holdings 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 AerCap Holdings 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 AerCap Holdings NV, you can compare the effects of market volatilities on Airports and AerCap Holdings 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 AerCap Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airports and AerCap Holdings.
Diversification Opportunities for Airports and AerCap Holdings
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Airports and AerCap is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and AerCap Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerCap Holdings NV 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 AerCap Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerCap Holdings NV has no effect on the direction of Airports i.e., Airports and AerCap Holdings go up and down completely randomly.
Pair Corralation between Airports and AerCap Holdings
Assuming the 90 days trading horizon Airports of Thailand is expected to generate 14.83 times more return on investment than AerCap Holdings. However, Airports is 14.83 times more volatile than AerCap Holdings NV. It trades about 0.22 of its potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.06 per unit of risk. If you would invest 85.00 in Airports of Thailand on September 12, 2024 and sell it today you would earn a total of 81.00 from holding Airports of Thailand or generate 95.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Airports of Thailand vs. AerCap Holdings NV
Performance |
| Timeline |
| Airports of Thailand |
| AerCap Holdings NV |
Airports and AerCap Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Airports and AerCap Holdings
The main advantage of trading using opposite Airports and AerCap Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airports position performs unexpectedly, AerCap Holdings 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 AerCap Holdings will offset losses from the drop in AerCap Holdings' long position.| Airports vs. Fast Retailing Co | Airports vs. COSTCO WHOLESALE CDR | Airports vs. ALTAIR RES INC | Airports vs. Norwegian Air Shuttle |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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