Correlation Between Alta Equipment and AerSale Corp

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

By analyzing existing cross correlation between Alta Equipment Group and AerSale Corp, you can compare the effects of market volatilities on Alta Equipment and AerSale Corp 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 Alta Equipment with a short position of AerSale Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alta Equipment and AerSale Corp.

Diversification Opportunities for Alta Equipment and AerSale Corp

0.55

Correlation Coefficient

Alta Equipment  AerSale Corp

Very weak diversification

The 3 months correlation between Alta and AerSale is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group and AerSale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerSale Corp and Alta Equipment 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 Alta Equipment Group are associated (or correlated) with AerSale Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerSale Corp has no effect on the direction of Alta Equipment i.e., Alta Equipment and AerSale Corp go up and down completely randomly.

Pair Corralation between Alta Equipment and AerSale Corp

Given the investment horizon of 90 days Alta Equipment Group is expected to generate 1.11 times more return on investment than AerSale Corp. However, Alta Equipment is 1.11 times more volatile than AerSale Corp. It trades about -0.02 of its potential returns per unit of risk. AerSale Corp is currently generating about -0.05 per unit of risk. If you would invest  1,555  in Alta Equipment Group on October 24, 2024 and sell it today you would lose (827.00) from holding Alta Equipment Group or give up 53.18% of portfolio value over 90 days.

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

Alta Equipment Group  vs.  AerSale Corp

Alta Equipment Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alta Equipment reported solid returns over the last few months and may actually be approaching a breakup point.

AerSale Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AerSale Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, AerSale Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alta Equipment and AerSale Corp

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

The idea behind Alta Equipment Group and AerSale Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.