Correlation Between Air Lease and Timken
Can any of the company-specific risk be diversified away by investing in both Air Lease and Timken 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 Timken into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Lease and Timken Company, you can compare the effects of market volatilities on Air Lease and Timken 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 Timken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and Timken.
Diversification Opportunities for Air Lease and Timken
Excellent diversification
The 3 months correlation between Air and Timken is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company 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 Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Air Lease i.e., Air Lease and Timken go up and down completely randomly.
Pair Corralation between Air Lease and Timken
Allowing for the 90-day total investment horizon Air Lease is expected to generate 1.06 times more return on investment than Timken. However, Air Lease is 1.06 times more volatile than Timken Company. It trades about 0.08 of its potential returns per unit of risk. Timken Company is currently generating about -0.02 per unit of risk. If you would invest 3,955 in Air Lease on August 27, 2024 and sell it today you would earn a total of 1,109 from holding Air Lease or generate 28.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Lease vs. Timken Company
Performance |
| Timeline |
| Air Lease |
| Timken Company |
Air Lease and Timken Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Lease and Timken
The main advantage of trading using opposite Air Lease and Timken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Lease position performs unexpectedly, Timken 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 Timken will offset losses from the drop in Timken'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 |
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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