Correlation Between Willis Lease and McGrath RentCorp
Can any of the company-specific risk be diversified away by investing in both Willis Lease and McGrath RentCorp 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 McGrath RentCorp 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 McGrath RentCorp, you can compare the effects of market volatilities on Willis Lease and McGrath RentCorp 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 McGrath RentCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willis Lease and McGrath RentCorp.
Diversification Opportunities for Willis Lease and McGrath RentCorp
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Willis and McGrath is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Willis Lease Finance and McGrath RentCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McGrath RentCorp 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 McGrath RentCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McGrath RentCorp has no effect on the direction of Willis Lease i.e., Willis Lease and McGrath RentCorp go up and down completely randomly.
Pair Corralation between Willis Lease and McGrath RentCorp
Given the investment horizon of 90 days Willis Lease Finance is expected to generate 3.63 times more return on investment than McGrath RentCorp. However, Willis Lease is 3.63 times more volatile than McGrath RentCorp. It trades about 0.11 of its potential returns per unit of risk. McGrath RentCorp is currently generating about 0.1 per unit of risk. If you would invest 19,058 in Willis Lease Finance on August 31, 2024 and sell it today you would earn a total of 2,156 from holding Willis Lease Finance or generate 11.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Willis Lease Finance vs. McGrath RentCorp
Performance |
| Timeline |
| Willis Lease Finance |
| McGrath RentCorp |
Willis Lease and McGrath RentCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Willis Lease and McGrath RentCorp
The main advantage of trading using opposite Willis Lease and McGrath RentCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willis Lease position performs unexpectedly, McGrath RentCorp 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 McGrath RentCorp will offset losses from the drop in McGrath RentCorp's long position.| Willis Lease vs. Custom Truck One | Willis Lease vs. GATX Corporation | Willis Lease vs. HE Equipment Services | Willis Lease vs. Alta Equipment Group |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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