Correlation Between Air Lease and LAir Liquide

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

By analyzing existing cross correlation between Air Lease and LAir Liquide SA, you can compare the effects of market volatilities on Air Lease and LAir Liquide 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 LAir Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and LAir Liquide.

Diversification Opportunities for Air Lease and LAir Liquide

-0.21

Correlation Coefficient

Air Lease  LAir Liquide

Very good diversification

The 3 months correlation between Air and LAir is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and LAir Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAir Liquide SA 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 LAir Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAir Liquide SA has no effect on the direction of Air Lease i.e., Air Lease and LAir Liquide go up and down completely randomly.

Pair Corralation between Air Lease and LAir Liquide

Allowing for the 90-day total investment horizon Air Lease is expected to generate 27.27 times less return on investment than LAir Liquide. In addition to that, Air Lease is 1.4 times more volatile than LAir Liquide SA. It trades about 0.01 of its total potential returns per unit of risk. LAir Liquide SA is currently generating about 0.2 per unit of volatility. If you would invest  16,146  in LAir Liquide SA on December 26, 2024 and sell it today you would earn a total of  3,143  from holding LAir Liquide SA or generate 19.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Air Lease  vs.  LAir Liquide SA

Air Lease

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Air Lease is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

LAir Liquide SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LAir Liquide SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, LAir Liquide reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Lease and LAir Liquide

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

The idea behind Air Lease and LAir Liquide SA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.