Correlation Between Air Lease and Companhia Paranaense

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

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

Diversification Opportunities for Air Lease and Companhia Paranaense

-0.21

Correlation Coefficient

Air Lease  Companhia Paranaense

Very good diversification

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

Pair Corralation between Air Lease and Companhia Paranaense

Allowing for the 90-day total investment horizon Air Lease is expected to generate 41.14 times less return on investment than Companhia Paranaense. But when comparing it to its historical volatility, Air Lease is 1.19 times less risky than Companhia Paranaense. It trades about 0.01 of its potential returns per unit of risk. Companhia Paranaense de is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  512.00  in Companhia Paranaense de on December 18, 2024 and sell it today you would earn a total of  151.00  from holding Companhia Paranaense de or generate 29.49% return on investment over 90 days.

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

Air Lease  vs.  Companhia Paranaense de

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.

Companhia Paranaense

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Paranaense de are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Companhia Paranaense exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Lease and Companhia Paranaense

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

The idea behind Air Lease and Companhia Paranaense de 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.