Correlation Between Nasdaq and Air Lease
Can any of the company-specific risk be diversified away by investing in both Nasdaq 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 Nasdaq and Air Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Air Lease, you can compare the effects of market volatilities on Nasdaq 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 Nasdaq with a short position of Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Air Lease.
Diversification Opportunities for Nasdaq and Air Lease
Very poor diversification
The 3 months correlation between Nasdaq and Air is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and Air Lease go up and down completely randomly.
Pair Corralation between Nasdaq and Air Lease
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.55 times more return on investment than Air Lease. However, Nasdaq Inc is 1.81 times less risky than Air Lease. It trades about 0.24 of its potential returns per unit of risk. Air Lease is currently generating about 0.04 per unit of risk. If you would invest 5,860 in Nasdaq Inc on August 29, 2024 and sell it today you would earn a total of 2,445 from holding Nasdaq Inc or generate 41.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. Air Lease
Performance |
| Timeline |
| Nasdaq Inc |
| Air Lease |
Nasdaq and Air Lease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Air Lease
The main advantage of trading using opposite Nasdaq and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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.The idea behind Nasdaq Inc and Air Lease 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.| 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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