Correlation Between Western Copper and Air Lease
Can any of the company-specific risk be diversified away by investing in both Western Copper and Air Lease 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 Western Copper and Air Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Copper and and Air Lease, you can compare the effects of market volatilities on Western Copper and Air Lease 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 Western Copper with a short position of Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Copper and Air Lease.
Diversification Opportunities for Western Copper and Air Lease
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Western and Air is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Western Copper 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 Western Copper and are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Western Copper i.e., Western Copper and Air Lease go up and down completely randomly.
Pair Corralation between Western Copper and Air Lease
Assuming the 90 days trading horizon Western Copper is expected to generate 2.08 times less return on investment than Air Lease. In addition to that, Western Copper is 2.2 times more volatile than Air Lease. It trades about 0.08 of its total potential returns per unit of risk. Air Lease is currently generating about 0.37 per unit of volatility. If you would invest 4,040 in Air Lease on September 1, 2024 and sell it today you would earn a total of 720.00 from holding Air Lease or generate 17.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Copper and vs. Air Lease
Performance |
| Timeline |
| Western Copper |
| Air Lease |
Western Copper and Air Lease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Copper and Air Lease
The main advantage of trading using opposite Western Copper and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Copper position performs unexpectedly, Air Lease 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 Air Lease will offset losses from the drop in Air Lease's long position.| Western Copper vs. BHP Group Limited | Western Copper vs. Rio Tinto Group | Western Copper vs. Rio Tinto Group | Western Copper vs. Vale SA |
| Air Lease vs. Caseys General Stores | Air Lease vs. Ping An Insurance | Air Lease vs. Selective Insurance Group | Air Lease vs. The Hanover Insurance |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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