Correlation Between AENA SME and AerCap Holdings

Can any of the company-specific risk be diversified away by investing in both AENA SME and AerCap Holdings 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 AENA SME and AerCap Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AENA SME UNSPADR110 and AerCap Holdings NV, you can compare the effects of market volatilities on AENA SME and AerCap Holdings 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 AENA SME with a short position of AerCap Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of AENA SME and AerCap Holdings.

Diversification Opportunities for AENA SME and AerCap Holdings

0.25

Correlation Coefficient

AENA SME  AerCap Holdings

Modest diversification

The 3 months correlation between AENA and AerCap is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding AENA SME UNSPADR110 and AerCap Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerCap Holdings NV and AENA SME 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 AENA SME UNSPADR110 are associated (or correlated) with AerCap Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerCap Holdings NV has no effect on the direction of AENA SME i.e., AENA SME and AerCap Holdings go up and down completely randomly.

Pair Corralation between AENA SME and AerCap Holdings

Assuming the 90 days trading horizon AENA SME UNSPADR110 is expected to generate 1.07 times more return on investment than AerCap Holdings. However, AENA SME is 1.07 times more volatile than AerCap Holdings NV. It trades about 0.1 of its potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.06 per unit of risk. If you would invest  1,920  in AENA SME UNSPADR110 on December 29, 2024 and sell it today you would earn a total of  180.00  from holding AENA SME UNSPADR110 or generate 9.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

AENA SME UNSPADR110  vs.  AerCap Holdings NV

AENA SME UNSPADR110

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AENA SME UNSPADR110 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, AENA SME may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AerCap Holdings NV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AerCap Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AENA SME and AerCap Holdings

The main advantage of trading using opposite AENA SME and AerCap Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AENA SME position performs unexpectedly, AerCap Holdings 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 AerCap Holdings will offset losses from the drop in AerCap Holdings' long position.

The idea behind AENA SME UNSPADR110 and AerCap Holdings NV 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.