Correlation Between Air Lease and Xunlei

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

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

Diversification Opportunities for Air Lease and Xunlei

-0.29

Correlation Coefficient

Air Lease  Xunlei

Very good diversification

The 3 months correlation between Air and Xunlei is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Xunlei Ltd Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xunlei Ltd Adr 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 Xunlei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xunlei Ltd Adr has no effect on the direction of Air Lease i.e., Air Lease and Xunlei go up and down completely randomly.

Pair Corralation between Air Lease and Xunlei

Allowing for the 90-day total investment horizon Air Lease is expected to under-perform the Xunlei. But the stock apears to be less risky and, when comparing its historical volatility, Air Lease is 3.22 times less risky than Xunlei. The stock trades about -0.01 of its potential returns per unit of risk. The Xunlei Ltd Adr is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  195.00  in Xunlei Ltd Adr on December 23, 2024 and sell it today you would earn a total of  315.00  from holding Xunlei Ltd Adr or generate 161.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Air Lease  vs.  Xunlei Ltd Adr

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.

Xunlei Ltd Adr

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xunlei Ltd Adr are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Xunlei unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Lease and Xunlei

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

The idea behind Air Lease and Xunlei Ltd Adr 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.