Correlation Between Food Life and Air Lease

Can any of the company-specific risk be diversified away by investing in both Food Life 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 Food Life and Air Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Food Life Companies and Air Lease, you can compare the effects of market volatilities on Food Life 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 Food Life with a short position of Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Food Life and Air Lease.

Diversification Opportunities for Food Life and Air Lease

0.85

Correlation Coefficient

Food Life  Air Lease

Very poor diversification

The 3 months correlation between Food and Air is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Food Life Companies and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Food Life 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 Food Life Companies 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 Food Life i.e., Food Life and Air Lease go up and down completely randomly.

Pair Corralation between Food Life and Air Lease

Assuming the 90 days horizon Food Life Companies is expected to generate 1.22 times more return on investment than Air Lease. However, Food Life is 1.22 times more volatile than Air Lease. It trades about 0.28 of its potential returns per unit of risk. Air Lease is currently generating about -0.11 per unit of risk. If you would invest  1,920  in Food Life Companies on September 22, 2024 and sell it today you would earn a total of  200.00  from holding Food Life Companies or generate 10.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Food Life Companies  vs.  Air Lease

Food Life Companies

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Food Life Companies are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Food Life reported solid returns over the last few months and may actually be approaching a breakup point.

Air Lease

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Food Life and Air Lease

The main advantage of trading using opposite Food Life and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Food Life 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 Food Life Companies 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.

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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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.