Correlation Between FTAI Aviation and Avadel Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both FTAI Aviation and Avadel Pharmaceuticals 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 FTAI Aviation and Avadel Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FTAI Aviation Ltd and Avadel Pharmaceuticals PLC, you can compare the effects of market volatilities on FTAI Aviation and Avadel Pharmaceuticals 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 FTAI Aviation with a short position of Avadel Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of FTAI Aviation and Avadel Pharmaceuticals.
Diversification Opportunities for FTAI Aviation and Avadel Pharmaceuticals
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FTAI and Avadel is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding FTAI Aviation Ltd and Avadel Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avadel Pharmaceuticals and FTAI Aviation 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 FTAI Aviation Ltd are associated (or correlated) with Avadel Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avadel Pharmaceuticals has no effect on the direction of FTAI Aviation i.e., FTAI Aviation and Avadel Pharmaceuticals go up and down completely randomly.
Pair Corralation between FTAI Aviation and Avadel Pharmaceuticals
Assuming the 90 days horizon FTAI Aviation Ltd is expected to generate 0.2 times more return on investment than Avadel Pharmaceuticals. However, FTAI Aviation Ltd is 4.94 times less risky than Avadel Pharmaceuticals. It trades about 0.13 of its potential returns per unit of risk. Avadel Pharmaceuticals PLC is currently generating about -0.06 per unit of risk. If you would invest 2,432 in FTAI Aviation Ltd on September 3, 2024 and sell it today you would earn a total of 356.00 from holding FTAI Aviation Ltd or generate 14.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FTAI Aviation Ltd vs. Avadel Pharmaceuticals PLC
Performance |
| Timeline |
| FTAI Aviation |
| Avadel Pharmaceuticals |
FTAI Aviation and Avadel Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FTAI Aviation and Avadel Pharmaceuticals
The main advantage of trading using opposite FTAI Aviation and Avadel Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FTAI Aviation position performs unexpectedly, Avadel Pharmaceuticals 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 Avadel Pharmaceuticals will offset losses from the drop in Avadel Pharmaceuticals' long position.| FTAI Aviation vs. Ryder System | FTAI Aviation vs. Air Lease | FTAI Aviation vs. Vestis | FTAI Aviation vs. Willis Lease Finance |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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