Correlation Between Air Lease and Arm Holdings

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Air Lease and Arm 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 Air Lease and Arm Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Lease and Arm Holdings plc, you can compare the effects of market volatilities on Air Lease and Arm 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 Air Lease with a short position of Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and Arm Holdings.

Diversification Opportunities for Air Lease and Arm Holdings

0.14
  Correlation Coefficient

Average diversification

The 3 months correlation between Air and Arm is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc 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 Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Air Lease i.e., Air Lease and Arm Holdings go up and down completely randomly.

Pair Corralation between Air Lease and Arm Holdings

Allowing for the 90-day total investment horizon Air Lease is expected to generate 0.45 times more return on investment than Arm Holdings. However, Air Lease is 2.21 times less risky than Arm Holdings. It trades about 0.01 of its potential returns per unit of risk. Arm Holdings plc is currently generating about -0.03 per unit of risk. If you would invest  4,705  in Air Lease on December 18, 2024 and sell it today you would lose (27.00) from holding Air Lease or give up 0.57% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Air Lease  vs.  Arm Holdings plc

 Performance 
       Timeline  
Air Lease 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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.
Arm Holdings plc 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Arm Holdings plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Air Lease and Arm Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Air Lease and Arm Holdings

The main advantage of trading using opposite Air Lease and Arm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Lease position performs unexpectedly, Arm 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 Arm Holdings will offset losses from the drop in Arm Holdings' long position.
The idea behind Air Lease and Arm Holdings plc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

Other Complementary Tools

Fundamental Analysis
View fundamental data based on most recent published financial statements
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Economic Indicators
Top statistical indicators that provide insights into how an economy is performing
USA ETFs
Find actively traded Exchange Traded Funds (ETF) in USA
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas