Correlation Between AerCap Holdings and GATX

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

Diversification Opportunities for AerCap Holdings and GATX

0.41

Correlation Coefficient

AerCap Holdings  GATX

Very weak diversification

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

Pair Corralation between AerCap Holdings and GATX

Considering the 90-day investment horizon AerCap Holdings NV is expected to generate 1.04 times more return on investment than GATX. However, AerCap Holdings is 1.04 times more volatile than GATX Corporation. It trades about 0.07 of its potential returns per unit of risk. GATX Corporation is currently generating about 0.06 per unit of risk. If you would invest  6,118  in AerCap Holdings NV on October 10, 2024 and sell it today you would earn a total of  3,399  from holding AerCap Holdings NV or generate 55.56% 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.  GATX Corp.

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.

GATX

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GATX Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, GATX showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AerCap Holdings and GATX

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

The idea behind AerCap Holdings NV and GATX Corporation 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.