Correlation Between Air Lease and International Game

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

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

Diversification Opportunities for Air Lease and International Game

-0.36

Correlation Coefficient

Air Lease  International Game

Very good diversification

The 3 months correlation between Air and International is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and International Game Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Game 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 International Game. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Game has no effect on the direction of Air Lease i.e., Air Lease and International Game go up and down completely randomly.

Pair Corralation between Air Lease and International Game

Assuming the 90 days trading horizon Air Lease is expected to generate 0.5 times more return on investment than International Game. However, Air Lease is 2.0 times less risky than International Game. It trades about -0.12 of its potential returns per unit of risk. International Game Technology is currently generating about -0.25 per unit of risk. If you would invest  4,738  in Air Lease on October 6, 2024 and sell it today you would lose (98.00) from holding Air Lease or give up 2.07% of portfolio value over 90 days.

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

Air Lease  vs.  International Game Technology

Air Lease

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Air Lease reported solid returns over the last few months and may actually be approaching a breakup point.

International Game

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Game Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Air Lease and International Game

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

The idea behind Air Lease and International Game Technology 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.