Can any of the company-specific risk be diversified away by investing in both Grupo Aeroportuario and Auckland International 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 Grupo Aeroportuario and Auckland International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grupo Aeroportuario del and Auckland International Airport, you can compare the effects of market volatilities on Grupo Aeroportuario and Auckland International 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 Grupo Aeroportuario with a short position of Auckland International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Aeroportuario and Auckland International.
Diversification Opportunities for Grupo Aeroportuario and Auckland International
The 3 months correlation between Grupo and Auckland is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aeroportuario del and Auckland International Airport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auckland International and Grupo Aeroportuario 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 Grupo Aeroportuario del are associated (or correlated) with Auckland International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auckland International has no effect on the direction of Grupo Aeroportuario i.e., Grupo Aeroportuario and Auckland International go up and down completely randomly.
Pair Corralation between Grupo Aeroportuario and Auckland International
Considering the 90-day investment horizon Grupo Aeroportuario del is expected to under-perform the Auckland International. In addition to that, Grupo Aeroportuario is 3.05 times more volatile than Auckland International Airport. It trades about -0.19 of its total potential returns per unit of risk. Auckland International Airport is currently generating about -0.02 per unit of volatility. If you would invest 467.00 in Auckland International Airport on March 6, 2024 and sell it today you would lose (2.00) from holding Auckland International Airport or give up 0.43% of portfolio value over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aeroportuario del are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Grupo Aeroportuario is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
Over the last 90 days Auckland International Airport has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Auckland International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.