Correlation Between Air Lease and First Community

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

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

Diversification Opportunities for Air Lease and First Community

0.83

Correlation Coefficient

Air Lease  First Community

Very poor diversification

The 3 months correlation between Air and First is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and First Community Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Banc 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 First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community Banc has no effect on the direction of Air Lease i.e., Air Lease and First Community go up and down completely randomly.

Pair Corralation between Air Lease and First Community

Allowing for the 90-day total investment horizon Air Lease is expected to generate 0.56 times more return on investment than First Community. However, Air Lease is 1.8 times less risky than First Community. It trades about 0.08 of its potential returns per unit of risk. First Community Bancshares is currently generating about 0.02 per unit of risk. If you would invest  4,569  in Air Lease on September 19, 2024 and sell it today you would earn a total of  339.00  from holding Air Lease or generate 7.42% return on investment over 90 days.

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

Air Lease  vs.  First Community Bancshares

Air Lease

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Community Banc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Community Bancshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, First Community is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Air Lease and First Community

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

The idea behind Air Lease and First Community Bancshares 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.