Correlation Between Willis Lease and Labrador Uranium

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

Diversification Opportunities for Willis Lease and Labrador Uranium

-0.66
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Willis and Labrador is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Willis Lease Finance and Labrador Uranium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labrador Uranium 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 Finance are associated (or correlated) with Labrador Uranium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labrador Uranium has no effect on the direction of Willis Lease i.e., Willis Lease and Labrador Uranium go up and down completely randomly.

Pair Corralation between Willis Lease and Labrador Uranium

Given the investment horizon of 90 days Willis Lease Finance is expected to generate 0.42 times more return on investment than Labrador Uranium. However, Willis Lease Finance is 2.38 times less risky than Labrador Uranium. It trades about 0.14 of its potential returns per unit of risk. Labrador Uranium is currently generating about -0.05 per unit of risk. If you would invest  4,867  in Willis Lease Finance on August 26, 2024 and sell it today you would earn a total of  15,859  from holding Willis Lease Finance or generate 325.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy13.96%
ValuesDaily Returns

Willis Lease Finance  vs.  Labrador Uranium

 Performance 
       Timeline  
Willis Lease Finance 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Willis Lease Finance are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Willis Lease exhibited solid returns over the last few months and may actually be approaching a breakup point.
Labrador Uranium 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Labrador Uranium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Labrador Uranium is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Willis Lease and Labrador Uranium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Willis Lease and Labrador Uranium

The main advantage of trading using opposite Willis Lease and Labrador Uranium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willis Lease position performs unexpectedly, Labrador Uranium 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 Labrador Uranium will offset losses from the drop in Labrador Uranium's long position.
The idea behind Willis Lease Finance and Labrador Uranium 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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