Correlation Between Air Lease and Hertz Global

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

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

Diversification Opportunities for Air Lease and Hertz Global

0.74

Correlation Coefficient

Air Lease  Hertz Global

Poor diversification

The 3 months correlation between Air and Hertz is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Hertz Global Hldgs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hertz Global Hldgs 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 Hertz Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hertz Global Hldgs has no effect on the direction of Air Lease i.e., Air Lease and Hertz Global go up and down completely randomly.

Pair Corralation between Air Lease and Hertz Global

Allowing for the 90-day total investment horizon Air Lease is expected to generate 0.45 times more return on investment than Hertz Global. However, Air Lease is 2.24 times less risky than Hertz Global. It trades about 0.02 of its potential returns per unit of risk. Hertz Global Hldgs is currently generating about -0.05 per unit of risk. If you would invest  4,236  in Air Lease on October 11, 2024 and sell it today you would earn a total of  490.00  from holding Air Lease or generate 11.57% return on investment over 90 days.

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

Air Lease  vs.  Hertz Global Hldgs

Air Lease

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hertz Global Hldgs

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Hldgs are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hertz Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Lease and Hertz Global

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

The idea behind Air Lease and Hertz Global Hldgs 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.