Correlation Between Air Lease and Loandepot

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

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

Diversification Opportunities for Air Lease and Loandepot

-0.04

Correlation Coefficient

Air Lease  Loandepot

Good diversification

The 3 months correlation between Air and Loandepot is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Loandepot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loandepot 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 Loandepot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loandepot has no effect on the direction of Air Lease i.e., Air Lease and Loandepot go up and down completely randomly.

Pair Corralation between Air Lease and Loandepot

Allowing for the 90-day total investment horizon Air Lease is expected to generate 1.33 times less return on investment than Loandepot. But when comparing it to its historical volatility, Air Lease is 2.59 times less risky than Loandepot. It trades about 0.04 of its potential returns per unit of risk. Loandepot is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  229.00  in Loandepot on September 13, 2024 and sell it today you would lose (16.00) from holding Loandepot or give up 6.99% of portfolio value over 90 days.

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

Air Lease  vs.  Loandepot

Air Lease

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Air Lease disclosed solid returns over the last few months and may actually be approaching a breakup point.

Loandepot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loandepot has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Air Lease and Loandepot

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

The idea behind Air Lease and Loandepot 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 Transaction History module to view history of all your transactions and understand their impact on performance.