Correlation Between AerCap Holdings and FTAI Aviation

Can any of the company-specific risk be diversified away by investing in both AerCap Holdings and FTAI 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 FTAI 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 FTAI Aviation Ltd, you can compare the effects of market volatilities on AerCap Holdings and FTAI 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 FTAI Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of AerCap Holdings and FTAI Aviation.

Diversification Opportunities for AerCap Holdings and FTAI Aviation

0.41

Correlation Coefficient

AerCap Holdings  FTAI Aviation

Very weak diversification

The 3 months correlation between AerCap and FTAI is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding AerCap Holdings NV and FTAI Aviation Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Aviation 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 FTAI Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Aviation has no effect on the direction of AerCap Holdings i.e., AerCap Holdings and FTAI Aviation go up and down completely randomly.

Pair Corralation between AerCap Holdings and FTAI Aviation

Considering the 90-day investment horizon AerCap Holdings NV is expected to generate 1.06 times more return on investment than FTAI Aviation. However, AerCap Holdings is 1.06 times more volatile than FTAI Aviation Ltd. It trades about 0.04 of its potential returns per unit of risk. FTAI Aviation Ltd is currently generating about 0.02 per unit of risk. If you would invest  9,527  in AerCap Holdings NV on October 10, 2024 and sell it today you would earn a total of  88.00  from holding AerCap Holdings NV or generate 0.92% return on investment over 90 days.

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

AerCap Holdings NV  vs.  FTAI Aviation Ltd

AerCap Holdings NV

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 1 (%) 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.

FTAI Aviation

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FTAI Aviation Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, FTAI Aviation is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with AerCap Holdings and FTAI Aviation

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

The idea behind AerCap Holdings NV and FTAI Aviation Ltd 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.