Correlation Between Air Lease and McGrath RentCorp
Can any of the company-specific risk be diversified away by investing in both Air Lease and McGrath RentCorp 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 Air Lease and McGrath RentCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Lease and McGrath RentCorp, you can compare the effects of market volatilities on Air Lease and McGrath RentCorp 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 Air Lease with a short position of McGrath RentCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and McGrath RentCorp.
Diversification Opportunities for Air Lease and McGrath RentCorp
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and McGrath is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and McGrath RentCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McGrath RentCorp and Air Lease 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 Air Lease are associated (or correlated) with McGrath RentCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McGrath RentCorp has no effect on the direction of Air Lease i.e., Air Lease and McGrath RentCorp go up and down completely randomly.
Pair Corralation between Air Lease and McGrath RentCorp
Allowing for the 90-day total investment horizon Air Lease is expected to under-perform the McGrath RentCorp. In addition to that, Air Lease is 1.51 times more volatile than McGrath RentCorp. It trades about -0.04 of its total potential returns per unit of risk. McGrath RentCorp is currently generating about 0.27 per unit of volatility. If you would invest 11,153 in McGrath RentCorp on October 20, 2024 and sell it today you would earn a total of 675.00 from holding McGrath RentCorp or generate 6.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Lease vs. McGrath RentCorp
Performance |
| Timeline |
| Air Lease |
| McGrath RentCorp |
Air Lease and McGrath RentCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Lease and McGrath RentCorp
The main advantage of trading using opposite Air Lease and McGrath RentCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Lease position performs unexpectedly, McGrath RentCorp 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 McGrath RentCorp will offset losses from the drop in McGrath RentCorp's long position.| Air Lease vs. Alta Equipment Group | Air Lease vs. McGrath RentCorp | Air Lease vs. Herc Holdings | Air Lease vs. HE Equipment Services |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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