Correlation Between AerSale Corp and CF Industries

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

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

Diversification Opportunities for AerSale Corp and CF Industries

0.68

Correlation Coefficient

AerSale Corp  CF Industries

Poor diversification

The 3 months correlation between AerSale and CF Industries is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding AerSale Corp and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings and AerSale Corp 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 AerSale Corp are associated (or correlated) with CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of AerSale Corp i.e., AerSale Corp and CF Industries go up and down completely randomly.

Pair Corralation between AerSale Corp and CF Industries

Given the investment horizon of 90 days AerSale Corp is expected to under-perform the CF Industries. In addition to that, AerSale Corp is 1.72 times more volatile than CF Industries Holdings. It trades about -0.05 of its total potential returns per unit of risk. CF Industries Holdings is currently generating about 0.02 per unit of volatility. If you would invest  8,145  in CF Industries Holdings on October 23, 2024 and sell it today you would earn a total of  1,204  from holding CF Industries Holdings or generate 14.78% return on investment over 90 days.

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

AerSale Corp  vs.  CF Industries Holdings

AerSale Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AerSale Corp are ranked lower than 12 (%) 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.

CF Industries Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CF Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AerSale Corp and CF Industries

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

The idea behind AerSale Corp and CF Industries Holdings 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.