Correlation Between Eastern and Air Lease
Can any of the company-specific risk be diversified away by investing in both Eastern and Air Lease 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 Eastern and Air Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Co and Air Lease, you can compare the effects of market volatilities on Eastern and Air Lease 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 Eastern with a short position of Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and Air Lease.
Diversification Opportunities for Eastern and Air Lease
Excellent diversification
The 3 months correlation between Eastern and Air is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Eastern 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 Eastern Co are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Eastern i.e., Eastern and Air Lease go up and down completely randomly.
Pair Corralation between Eastern and Air Lease
Considering the 90-day investment horizon Eastern Co is expected to under-perform the Air Lease. In addition to that, Eastern is 1.5 times more volatile than Air Lease. It trades about -0.12 of its total potential returns per unit of risk. Air Lease is currently generating about 0.37 per unit of volatility. If you would invest 4,435 in Air Lease on September 1, 2024 and sell it today you would earn a total of 655.00 from holding Air Lease or generate 14.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Co vs. Air Lease
Performance |
| Timeline |
| Eastern |
| Air Lease |
Eastern and Air Lease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern and Air Lease
The main advantage of trading using opposite Eastern and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern position performs unexpectedly, Air Lease 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 Air Lease will offset losses from the drop in Air Lease's long position.| Eastern vs. Timken Company | Eastern vs. Lincoln Electric Holdings | Eastern vs. Hillman Solutions Corp | Eastern vs. AB SKF |
| Air Lease vs. Alta Equipment Group | Air Lease vs. McGrath RentCorp | Air Lease vs. Herc Holdings | Air Lease 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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