Correlation Between Armada Hflr and AerCap Holdings

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

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

Diversification Opportunities for Armada Hflr and AerCap Holdings

-0.35

Correlation Coefficient

Armada Hflr  AerCap Holdings

Very good diversification

The 3 months correlation between Armada and AerCap is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr 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 Armada Hflr 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 Armada Hflr Pr 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 Armada Hflr i.e., Armada Hflr and AerCap Holdings go up and down completely randomly.

Pair Corralation between Armada Hflr and AerCap Holdings

Considering the 90-day investment horizon Armada Hflr is expected to generate 3.78 times less return on investment than AerCap Holdings. But when comparing it to its historical volatility, Armada Hflr Pr is 1.26 times less risky than AerCap Holdings. It trades about 0.03 of its potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,750  in AerCap Holdings NV on September 13, 2024 and sell it today you would earn a total of  400.00  from holding AerCap Holdings NV or generate 4.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Armada Hflr Pr  vs.  AerCap Holdings NV

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Armada Hflr is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

AerCap Holdings NV

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AerCap Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Armada Hflr and AerCap Holdings

The main advantage of trading using opposite Armada Hflr and AerCap Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr 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 Armada Hflr Pr 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.