Correlation Between Air Lease and Jabil Circuit

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

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

Diversification Opportunities for Air Lease and Jabil Circuit

0.7

Correlation Coefficient

Air Lease  Jabil Circuit

Poor diversification

The 3 months correlation between Air and Jabil is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Jabil Circuit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jabil Circuit 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 Jabil Circuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jabil Circuit has no effect on the direction of Air Lease i.e., Air Lease and Jabil Circuit go up and down completely randomly.

Pair Corralation between Air Lease and Jabil Circuit

Allowing for the 90-day total investment horizon Air Lease is expected to generate 3.29 times less return on investment than Jabil Circuit. But when comparing it to its historical volatility, Air Lease is 1.02 times less risky than Jabil Circuit. It trades about 0.04 of its potential returns per unit of risk. Jabil Circuit is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  10,837  in Jabil Circuit on September 29, 2024 and sell it today you would earn a total of  3,755  from holding Jabil Circuit or generate 34.65% 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.  Jabil Circuit

Air Lease

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Jabil Circuit

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jabil Circuit are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental drivers, Jabil Circuit disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Lease and Jabil Circuit

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

The idea behind Air Lease and Jabil Circuit 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..