Correlation Between Airports and Nedbank

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

Diversification Opportunities for Airports and Nedbank

-0.19

Correlation Coefficient

Airports  Nedbank

Good diversification

The 3 months correlation between Airports and Nedbank is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and Nedbank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nedbank Group 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 Nedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nedbank Group has no effect on the direction of Airports i.e., Airports and Nedbank go up and down completely randomly.

Pair Corralation between Airports and Nedbank

Assuming the 90 days horizon Airports of Thailand is expected to under-perform the Nedbank. In addition to that, Airports is 1.52 times more volatile than Nedbank Group. It trades about -0.09 of its total potential returns per unit of risk. Nedbank Group is currently generating about 0.23 per unit of volatility. If you would invest  1,128  in Nedbank Group on February 3, 2024 and sell it today you would earn a total of  103.00  from holding Nedbank Group or generate 9.13% return on investment over 90 days.

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

Airports of Thailand  vs.  Nedbank Group

Airports of Thailand

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Airports of Thailand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Airports is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nedbank Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nedbank Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Nedbank may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Airports and Nedbank

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

The idea behind Airports of Thailand and Nedbank Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.