Correlation Between Torm PLC and Air Lease
Can any of the company-specific risk be diversified away by investing in both Torm PLC 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 Torm PLC and Air Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Torm PLC Class and Air Lease, you can compare the effects of market volatilities on Torm PLC 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 Torm PLC with a short position of Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Torm PLC and Air Lease.
Diversification Opportunities for Torm PLC and Air Lease
Excellent diversification
The 3 months correlation between Torm and Air is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Torm PLC Class and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Torm PLC 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 Torm PLC Class 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 Torm PLC i.e., Torm PLC and Air Lease go up and down completely randomly.
Pair Corralation between Torm PLC and Air Lease
Given the investment horizon of 90 days Torm PLC Class is expected to under-perform the Air Lease. In addition to that, Torm PLC is 1.47 times more volatile than Air Lease. It trades about -0.26 of its total potential returns per unit of risk. Air Lease is currently generating about 0.31 per unit of volatility. If you would invest 4,479 in Air Lease on August 30, 2024 and sell it today you would earn a total of 592.00 from holding Air Lease or generate 13.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Torm PLC Class vs. Air Lease
Performance |
| Timeline |
| Torm PLC Class |
| Air Lease |
Torm PLC and Air Lease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Torm PLC and Air Lease
The main advantage of trading using opposite Torm PLC and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Torm PLC 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 Torm PLC Class 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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