Correlation Between AerCap Holdings and BOC Aviation

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

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

Diversification Opportunities for AerCap Holdings and BOC Aviation

-0.31

Correlation Coefficient

AerCap Holdings  BOC Aviation

Very good diversification

The 3 months correlation between AerCap and BOC is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding AerCap Holdings NV and BOC Aviation Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOC Aviation Limited and AerCap Holdings 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 AerCap Holdings NV are associated (or correlated) with BOC Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOC Aviation Limited has no effect on the direction of AerCap Holdings i.e., AerCap Holdings and BOC Aviation go up and down completely randomly.

Pair Corralation between AerCap Holdings and BOC Aviation

Considering the 90-day investment horizon AerCap Holdings is expected to generate 8.26 times less return on investment than BOC Aviation. But when comparing it to its historical volatility, AerCap Holdings NV is 6.88 times less risky than BOC Aviation. It trades about 0.07 of its potential returns per unit of risk. BOC Aviation Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  434.00  in BOC Aviation Limited on September 18, 2024 and sell it today you would earn a total of  371.00  from holding BOC Aviation Limited or generate 85.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.76%
Values	Daily Returns

AerCap Holdings NV  vs.  BOC Aviation Limited

AerCap Holdings NV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, AerCap Holdings is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

BOC Aviation Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BOC Aviation Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with AerCap Holdings and BOC Aviation

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

The idea behind AerCap Holdings NV and BOC Aviation Limited 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.