Correlation Between WILLIS LEASE and KAUFMAN ET
Can any of the company-specific risk be diversified away by investing in both WILLIS LEASE and KAUFMAN ET 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 WILLIS LEASE and KAUFMAN ET into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WILLIS LEASE FIN and KAUFMAN ET BROAD, you can compare the effects of market volatilities on WILLIS LEASE and KAUFMAN ET 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 WILLIS LEASE with a short position of KAUFMAN ET. Check out your portfolio center. Please also check ongoing floating volatility patterns of WILLIS LEASE and KAUFMAN ET.
Diversification Opportunities for WILLIS LEASE and KAUFMAN ET
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WILLIS and KAUFMAN is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and KAUFMAN ET BROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAUFMAN ET BROAD and WILLIS LEASE 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 WILLIS LEASE FIN are associated (or correlated) with KAUFMAN ET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAUFMAN ET BROAD has no effect on the direction of WILLIS LEASE i.e., WILLIS LEASE and KAUFMAN ET go up and down completely randomly.
Pair Corralation between WILLIS LEASE and KAUFMAN ET
Assuming the 90 days horizon WILLIS LEASE FIN is expected to generate 4.45 times more return on investment than KAUFMAN ET. However, WILLIS LEASE is 4.45 times more volatile than KAUFMAN ET BROAD. It trades about 0.13 of its potential returns per unit of risk. KAUFMAN ET BROAD is currently generating about -0.31 per unit of risk. If you would invest 16,680 in WILLIS LEASE FIN on August 30, 2024 and sell it today you would earn a total of 2,620 from holding WILLIS LEASE FIN or generate 15.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WILLIS LEASE FIN vs. KAUFMAN ET BROAD
Performance |
| Timeline |
| WILLIS LEASE FIN |
| KAUFMAN ET BROAD |
WILLIS LEASE and KAUFMAN ET Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WILLIS LEASE and KAUFMAN ET
The main advantage of trading using opposite WILLIS LEASE and KAUFMAN ET positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WILLIS LEASE position performs unexpectedly, KAUFMAN ET 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 KAUFMAN ET will offset losses from the drop in KAUFMAN ET's long position.| WILLIS LEASE vs. Superior Plus Corp | WILLIS LEASE vs. SIVERS SEMICONDUCTORS AB | WILLIS LEASE vs. Talanx AG | WILLIS LEASE vs. 2G ENERGY |
| KAUFMAN ET vs. Apple Inc | KAUFMAN ET vs. Apple Inc | KAUFMAN ET vs. Superior Plus Corp | KAUFMAN ET vs. SIVERS SEMICONDUCTORS AB |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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