Correlation Between Air Lease and Rand Capital

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

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

Diversification Opportunities for Air Lease and Rand Capital

0.36

Correlation Coefficient

Air Lease  Rand Capital

Weak diversification

The 3 months correlation between Air and Rand is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Rand Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rand Capital Corp 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 Rand Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rand Capital Corp has no effect on the direction of Air Lease i.e., Air Lease and Rand Capital go up and down completely randomly.

Pair Corralation between Air Lease and Rand Capital

Allowing for the 90-day total investment horizon Air Lease is expected to under-perform the Rand Capital. But the stock apears to be less risky and, when comparing its historical volatility, Air Lease is 3.6 times less risky than Rand Capital. The stock trades about -0.12 of its potential returns per unit of risk. The Rand Capital Corp is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,338  in Rand Capital Corp on September 27, 2024 and sell it today you would earn a total of  474.00  from holding Rand Capital Corp or generate 35.43% 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.  Rand Capital Corp

Air Lease

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 6 (%) 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.

Rand Capital Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rand Capital Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Rand Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Lease and Rand Capital

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

The idea behind Air Lease and Rand Capital Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.