Correlation Between Air Lease and Red Violet

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

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

Diversification Opportunities for Air Lease and Red Violet

0.39

Correlation Coefficient

Air Lease  Red Violet

Weak diversification

The 3 months correlation between Air and Red is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Red Violet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Violet 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 Red Violet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Violet has no effect on the direction of Air Lease i.e., Air Lease and Red Violet go up and down completely randomly.

Pair Corralation between Air Lease and Red Violet

Allowing for the 90-day total investment horizon Air Lease is expected to generate 25.34 times less return on investment than Red Violet. But when comparing it to its historical volatility, Air Lease is 1.28 times less risky than Red Violet. It trades about 0.0 of its potential returns per unit of risk. Red Violet is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,706  in Red Violet on December 26, 2024 and sell it today you would earn a total of  369.00  from holding Red Violet or generate 9.96% 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.  Red Violet

Air Lease

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Lease has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Red Violet

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Red Violet are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Red Violet may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Air Lease and Red Violet

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

The idea behind Air Lease and Red Violet 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.