Correlation Between Air Lease and ZTO Express

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

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

Diversification Opportunities for Air Lease and ZTO Express

-0.83

Correlation Coefficient

Air Lease  ZTO Express

Pay attention - limited upside

The 3 months correlation between Air and ZTO is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and ZTO Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTO Express 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 ZTO Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTO Express has no effect on the direction of Air Lease i.e., Air Lease and ZTO Express go up and down completely randomly.

Pair Corralation between Air Lease and ZTO Express

Allowing for the 90-day total investment horizon Air Lease is expected to generate 0.76 times more return on investment than ZTO Express. However, Air Lease is 1.32 times less risky than ZTO Express. It trades about 0.08 of its potential returns per unit of risk. ZTO Express is currently generating about -0.2 per unit of risk. If you would invest  4,834  in Air Lease on September 13, 2024 and sell it today you would earn a total of  117.00  from holding Air Lease or generate 2.42% return on investment over 90 days.

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

Air Lease  vs.  ZTO Express

Air Lease

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Air Lease disclosed solid returns over the last few months and may actually be approaching a breakup point.

ZTO Express

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZTO Express has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Air Lease and ZTO Express

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

The idea behind Air Lease and ZTO Express 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.