Correlation Between PSI Software and Air Lease

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

Diversification Opportunities for PSI Software and Air Lease

-0.7
  Correlation Coefficient

Excellent diversification

The 3 months correlation between PSI and Air is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding PSI Software AG and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and PSI Software 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 PSI Software AG 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 PSI Software i.e., PSI Software and Air Lease go up and down completely randomly.

Pair Corralation between PSI Software and Air Lease

Assuming the 90 days trading horizon PSI Software AG is expected to under-perform the Air Lease. In addition to that, PSI Software is 1.11 times more volatile than Air Lease. It trades about -0.02 of its total potential returns per unit of risk. Air Lease is currently generating about 0.06 per unit of volatility. If you would invest  3,585  in Air Lease on September 12, 2024 and sell it today you would earn a total of  1,155  from holding Air Lease or generate 32.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

PSI Software AG  vs.  Air Lease

 Performance 
       Timeline  
PSI Software AG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PSI Software AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PSI Software is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
Air Lease 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Air Lease reported solid returns over the last few months and may actually be approaching a breakup point.

PSI Software and Air Lease Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PSI Software and Air Lease

The main advantage of trading using opposite PSI Software and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PSI Software 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.
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The idea behind PSI Software AG 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.
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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