Correlation Between Air Lease and Community

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

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

Diversification Opportunities for Air Lease and Community

0.02

Correlation Coefficient

Air Lease  Community

Significant diversification

The 3 months correlation between Air and Community is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Community Health Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Health Systems 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 Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Health Systems has no effect on the direction of Air Lease i.e., Air Lease and Community go up and down completely randomly.

Pair Corralation between Air Lease and Community

Allowing for the 90-day total investment horizon Air Lease is expected to generate 0.7 times more return on investment than Community. However, Air Lease is 1.43 times less risky than Community. It trades about 0.02 of its potential returns per unit of risk. Community Health Systems is currently generating about -0.15 per unit of risk. If you would invest  4,781  in Air Lease on December 30, 2024 and sell it today you would earn a total of  41.00  from holding Air Lease or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	67.74%
Values	Daily Returns

Air Lease  vs.  Community Health Systems

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.

Community Health Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Community Health Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for Community Health Systems investors.

Pair Trading with Air Lease and Community

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

The idea behind Air Lease and Community Health Systems 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.