Correlation Between Antero Midstream and Air Lease

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

By analyzing existing cross correlation between Antero Midstream Partners and Air Lease, you can compare the effects of market volatilities on Antero Midstream and Air Lease 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 Antero Midstream with a short position of Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Antero Midstream and Air Lease.

Diversification Opportunities for Antero Midstream and Air Lease

-0.28

Correlation Coefficient

Antero Midstream  Air Lease

Very good diversification

The 3 months correlation between Antero and Air is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Antero Midstream Partners and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Antero Midstream 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 Antero Midstream Partners are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Antero Midstream i.e., Antero Midstream and Air Lease go up and down completely randomly.

Pair Corralation between Antero Midstream and Air Lease

Allowing for the 90-day total investment horizon Antero Midstream Partners is expected to generate 0.99 times more return on investment than Air Lease. However, Antero Midstream Partners is 1.01 times less risky than Air Lease. It trades about 0.04 of its potential returns per unit of risk. Air Lease is currently generating about -0.04 per unit of risk. If you would invest  1,574  in Antero Midstream Partners on November 28, 2024 and sell it today you would earn a total of  59.00  from holding Antero Midstream Partners or generate 3.75% return on investment over 90 days.

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

Antero Midstream Partners  vs.  Air Lease

Antero Midstream Partners

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Antero Midstream is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Antero Midstream and Air Lease

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

The idea behind Antero Midstream Partners and Air Lease 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.