Correlation Between Volkswagen and Air Lease
Can any of the company-specific risk be diversified away by investing in both Volkswagen 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 Volkswagen and Air Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Air Lease, you can compare the effects of market volatilities on Volkswagen 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 Volkswagen with a short position of Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Air Lease.
Diversification Opportunities for Volkswagen and Air Lease
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Volkswagen and Air is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Volkswagen 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 Volkswagen 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 Volkswagen i.e., Volkswagen and Air Lease go up and down completely randomly.
Pair Corralation between Volkswagen and Air Lease
Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the Air Lease. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.06 times less risky than Air Lease. The stock trades about -0.05 of its potential returns per unit of risk. The Air Lease is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,372 in Air Lease on September 5, 2024 and sell it today you would earn a total of 1,428 from holding Air Lease or generate 42.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Volkswagen AG vs. Air Lease
Performance |
| Timeline |
| Volkswagen AG |
| Air Lease |
Volkswagen and Air Lease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Air Lease
The main advantage of trading using opposite Volkswagen and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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.| Volkswagen vs. ORMAT TECHNOLOGIES | Volkswagen vs. Nordic Semiconductor ASA | Volkswagen vs. Taiwan Semiconductor Manufacturing | Volkswagen vs. Lion Biotechnologies |
| Air Lease vs. RETAIL FOOD GROUP | Air Lease vs. TYSON FOODS A | Air Lease vs. United Natural Foods | Air Lease vs. Performance Food Group |
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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