Correlation Between Air Lease and Cars

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

Diversification Opportunities for Air Lease and Cars

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Air and Cars is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Air Lease i.e., Air Lease and Cars go up and down completely randomly.

Pair Corralation between Air Lease and Cars

Assuming the 90 days trading horizon Air Lease is expected to generate 0.62 times more return on investment than Cars. However, Air Lease is 1.61 times less risky than Cars. It trades about 0.05 of its potential returns per unit of risk. Cars Inc is currently generating about 0.01 per unit of risk. If you would invest  3,430  in Air Lease on August 24, 2024 and sell it today you would earn a total of  1,110  from holding Air Lease or generate 32.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Air Lease  vs.  Cars Inc

 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 nearly fragile essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Cars Inc 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cars may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Air Lease and Cars Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Air Lease and Cars

The main advantage of trading using opposite Air Lease and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Lease position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.
The idea behind Air Lease and Cars Inc 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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