Correlation Between Air Lease and Westrock Coffee
Can any of the company-specific risk be diversified away by investing in both Air Lease and Westrock Coffee 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 Westrock Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Lease and Westrock Coffee, you can compare the effects of market volatilities on Air Lease and Westrock Coffee 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 Westrock Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and Westrock Coffee.
Diversification Opportunities for Air Lease and Westrock Coffee
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Westrock is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee 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 Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of Air Lease i.e., Air Lease and Westrock Coffee go up and down completely randomly.
Pair Corralation between Air Lease and Westrock Coffee
Allowing for the 90-day total investment horizon Air Lease is expected to generate 0.72 times more return on investment than Westrock Coffee. However, Air Lease is 1.39 times less risky than Westrock Coffee. It trades about 0.04 of its potential returns per unit of risk. Westrock Coffee is currently generating about -0.05 per unit of risk. If you would invest 3,760 in Air Lease on September 24, 2024 and sell it today you would earn a total of 1,090 from holding Air Lease or generate 28.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Air Lease vs. Westrock Coffee
Performance |
Timeline |
Air Lease |
Westrock Coffee |
Air Lease and Westrock Coffee Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Air Lease and Westrock Coffee
The main advantage of trading using opposite Air Lease and Westrock Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Lease position performs unexpectedly, Westrock Coffee 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 Westrock Coffee will offset losses from the drop in Westrock Coffee's long position.Air Lease vs. PROG Holdings | Air Lease vs. McGrath RentCorp | Air Lease vs. GATX Corporation | Air Lease vs. Alta Equipment Group |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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