Correlation Between Ford and AerCap Holdings
Can any of the company-specific risk be diversified away by investing in both Ford and AerCap Holdings 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 Ford and AerCap Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and AerCap Holdings NV, you can compare the effects of market volatilities on Ford and AerCap Holdings 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 Ford with a short position of AerCap Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and AerCap Holdings.
Diversification Opportunities for Ford and AerCap Holdings
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and AerCap is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AerCap Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerCap Holdings NV and Ford 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 Ford Motor are associated (or correlated) with AerCap Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerCap Holdings NV has no effect on the direction of Ford i.e., Ford and AerCap Holdings go up and down completely randomly.
Pair Corralation between Ford and AerCap Holdings
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.8 times more return on investment than AerCap Holdings. However, Ford is 1.8 times more volatile than AerCap Holdings NV. It trades about 0.08 of its potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.12 per unit of risk. If you would invest 1,042 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 68.00 from holding Ford Motor or generate 6.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. AerCap Holdings NV
Performance |
| Timeline |
| Ford Motor |
| AerCap Holdings NV |
Ford and AerCap Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and AerCap Holdings
The main advantage of trading using opposite Ford and AerCap Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, AerCap Holdings 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 AerCap Holdings will offset losses from the drop in AerCap Holdings' long position.The idea behind Ford Motor and AerCap Holdings NV 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.| AerCap Holdings vs. Ryder System | AerCap Holdings vs. Alta Equipment Group | AerCap Holdings vs. PROG Holdings | AerCap Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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