Correlation Between Major Drilling and Air Lease

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

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

Diversification Opportunities for Major Drilling and Air Lease

0.39

Correlation Coefficient

Major Drilling  Air Lease

Weak diversification

The 3 months correlation between Major and Air is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Major Drilling 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 Major Drilling Group 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 Major Drilling i.e., Major Drilling and Air Lease go up and down completely randomly.

Pair Corralation between Major Drilling and Air Lease

Assuming the 90 days horizon Major Drilling Group is expected to under-perform the Air Lease. In addition to that, Major Drilling is 1.28 times more volatile than Air Lease. It trades about -0.01 of its total potential returns per unit of risk. Air Lease is currently generating about 0.02 per unit of volatility. If you would invest  3,951  in Air Lease on October 22, 2024 and sell it today you would earn a total of  569.00  from holding Air Lease or generate 14.4% return on investment over 90 days.

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

Major Drilling Group  vs.  Air Lease

Major Drilling Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Major Drilling is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 uncertain essential indicators, Air Lease reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Major Drilling and Air Lease

The main advantage of trading using opposite Major Drilling and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling 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 Major Drilling Group 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.