Correlation Between Air Lease and Nabors Industries

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Can any of the company-specific risk be diversified away by investing in both Air Lease and Nabors Industries 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 Nabors Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Lease and Nabors Industries, you can compare the effects of market volatilities on Air Lease and Nabors Industries 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 Nabors Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and Nabors Industries.

Diversification Opportunities for Air Lease and Nabors Industries

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between Air and Nabors is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries 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 Nabors Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Industries has no effect on the direction of Air Lease i.e., Air Lease and Nabors Industries go up and down completely randomly.

Pair Corralation between Air Lease and Nabors Industries

Allowing for the 90-day total investment horizon Air Lease is expected to generate 0.5 times more return on investment than Nabors Industries. However, Air Lease is 1.99 times less risky than Nabors Industries. It trades about 0.33 of its potential returns per unit of risk. Nabors Industries is currently generating about 0.11 per unit of risk. If you would invest  4,396  in Air Lease on August 24, 2024 and sell it today you would earn a total of  584.00  from holding Air Lease or generate 13.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Air Lease  vs.  Nabors Industries

 Performance 
       Timeline  
Air Lease 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Nabors Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nabors Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Nabors Industries is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Air Lease and Nabors Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Air Lease and Nabors Industries

The main advantage of trading using opposite Air Lease and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Lease position performs unexpectedly, Nabors Industries 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 Nabors Industries will offset losses from the drop in Nabors Industries' long position.
The idea behind Air Lease and Nabors Industries 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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