Correlation Between Air Lease and Automatic Data

Can any of the company-specific risk be diversified away by investing in both Air Lease and Automatic Data 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 Air Lease and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Air Lease and Automatic Data Processing, you can compare the effects of market volatilities on Air Lease and Automatic Data 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 Air Lease with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and Automatic Data.

Diversification Opportunities for Air Lease and Automatic Data

0.13

Correlation Coefficient

Air Lease  Automatic Data

Average diversification

The 3 months correlation between Air and Automatic is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing and Air Lease 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 Air Lease are associated (or correlated) with Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Air Lease i.e., Air Lease and Automatic Data go up and down completely randomly.

Pair Corralation between Air Lease and Automatic Data

Allowing for the 90-day total investment horizon Air Lease is expected to generate 1.27 times less return on investment than Automatic Data. In addition to that, Air Lease is 2.05 times more volatile than Automatic Data Processing. It trades about 0.03 of its total potential returns per unit of risk. Automatic Data Processing is currently generating about 0.08 per unit of volatility. If you would invest  29,142  in Automatic Data Processing on December 28, 2024 and sell it today you would earn a total of  1,401  from holding Automatic Data Processing or generate 4.81% return on investment over 90 days.

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

Air Lease  vs.  Automatic Data Processing

Air Lease

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Air Lease is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Automatic Data Processing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Automatic Data is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Air Lease and Automatic Data

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

The idea behind Air Lease and Automatic Data Processing 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.