Correlation Between Air Lease and Premium Catering

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

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

Diversification Opportunities for Air Lease and Premium Catering

0.07

Correlation Coefficient

Air Lease  Premium Catering

Significant diversification

The 3 months correlation between Air and Premium is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Premium Catering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Catering 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 Premium Catering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Catering has no effect on the direction of Air Lease i.e., Air Lease and Premium Catering go up and down completely randomly.

Pair Corralation between Air Lease and Premium Catering

Allowing for the 90-day total investment horizon Air Lease is expected to generate 17.65 times less return on investment than Premium Catering. But when comparing it to its historical volatility, Air Lease is 2.83 times less risky than Premium Catering. It trades about 0.01 of its potential returns per unit of risk. Premium Catering Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  73.00  in Premium Catering Limited on December 25, 2024 and sell it today you would earn a total of  15.00  from holding Premium Catering Limited or generate 20.55% return on investment over 90 days.

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

Air Lease  vs.  Premium Catering Limited

Air Lease

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Air Lease is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Premium Catering

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Premium Catering Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Premium Catering exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Lease and Premium Catering

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

The idea behind Air Lease and Premium Catering Limited 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.