Correlation Between Air Lease and National CineMedia

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

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

Diversification Opportunities for Air Lease and National CineMedia

0.28

Correlation Coefficient

Air Lease  National CineMedia

Modest diversification

The 3 months correlation between Air and National is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia 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 National CineMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National CineMedia has no effect on the direction of Air Lease i.e., Air Lease and National CineMedia go up and down completely randomly.

Pair Corralation between Air Lease and National CineMedia

Allowing for the 90-day total investment horizon Air Lease is expected to generate 0.67 times more return on investment than National CineMedia. However, Air Lease is 1.5 times less risky than National CineMedia. It trades about 0.13 of its potential returns per unit of risk. National CineMedia is currently generating about 0.05 per unit of risk. If you would invest  4,402  in Air Lease on September 14, 2024 and sell it today you would earn a total of  535.00  from holding Air Lease or generate 12.15% return on investment over 90 days.

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

Air Lease  vs.  National CineMedia

Air Lease

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 10 (%) 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 January 2025.

National CineMedia

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National CineMedia are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting primary indicators, National CineMedia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Air Lease and National CineMedia

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

The idea behind Air Lease and National CineMedia 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.