Correlation Between Air Lease and Royalty Management

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

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

Diversification Opportunities for Air Lease and Royalty Management

-0.01

Correlation Coefficient

Air Lease  Royalty Management

Good diversification

The 3 months correlation between Air and Royalty is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Royalty Management Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royalty Management 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 Royalty Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royalty Management has no effect on the direction of Air Lease i.e., Air Lease and Royalty Management go up and down completely randomly.

Pair Corralation between Air Lease and Royalty Management

Allowing for the 90-day total investment horizon Air Lease is expected to generate 0.58 times more return on investment than Royalty Management. However, Air Lease is 1.71 times less risky than Royalty Management. It trades about 0.01 of its potential returns per unit of risk. Royalty Management Holding is currently generating about -0.03 per unit of risk. If you would invest  4,705  in Air Lease on December 18, 2024 and sell it today you would lose (27.00) from holding Air Lease or give up 0.57% 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.  Royalty Management Holding

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.

Royalty Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royalty Management Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Air Lease and Royalty Management

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

The idea behind Air Lease and Royalty Management Holding 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.