Correlation Between AerCap Holdings and Universal Music
Can any of the company-specific risk be diversified away by investing in both AerCap Holdings and Universal Music 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 AerCap Holdings and Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AerCap Holdings NV and Universal Music Group, you can compare the effects of market volatilities on AerCap Holdings and Universal Music 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 AerCap Holdings with a short position of Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of AerCap Holdings and Universal Music.
Diversification Opportunities for AerCap Holdings and Universal Music
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AerCap and Universal is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding AerCap Holdings NV and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group and AerCap Holdings 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 AerCap Holdings NV are associated (or correlated) with Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of AerCap Holdings i.e., AerCap Holdings and Universal Music go up and down completely randomly.
Pair Corralation between AerCap Holdings and Universal Music
Considering the 90-day investment horizon AerCap Holdings NV is expected to generate 0.72 times more return on investment than Universal Music. However, AerCap Holdings NV is 1.38 times less risky than Universal Music. It trades about 0.07 of its potential returns per unit of risk. Universal Music Group is currently generating about 0.01 per unit of risk. If you would invest 6,144 in AerCap Holdings NV on August 31, 2024 and sell it today you would earn a total of 3,792 from holding AerCap Holdings NV or generate 61.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
AerCap Holdings NV vs. Universal Music Group
Performance |
| Timeline |
| AerCap Holdings NV |
| Universal Music Group |
AerCap Holdings and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AerCap Holdings and Universal Music
The main advantage of trading using opposite AerCap Holdings and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AerCap Holdings position performs unexpectedly, Universal Music 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 Universal Music will offset losses from the drop in Universal Music's long position.| AerCap Holdings vs. Ryder System | AerCap Holdings vs. Alta Equipment Group | AerCap Holdings vs. PROG Holdings | AerCap Holdings vs. GATX Corporation |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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