Correlation Between Air Lease and Australian Agricultural

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

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

Diversification Opportunities for Air Lease and Australian Agricultural

-0.35

Correlation Coefficient

Air Lease  Australian Agricultural

Very good diversification

The 3 months correlation between Air and Australian is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural 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 Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Air Lease i.e., Air Lease and Australian Agricultural go up and down completely randomly.

Pair Corralation between Air Lease and Australian Agricultural

Assuming the 90 days trading horizon Air Lease is expected to under-perform the Australian Agricultural. In addition to that, Air Lease is 1.38 times more volatile than Australian Agricultural. It trades about -0.02 of its total potential returns per unit of risk. Australian Agricultural is currently generating about 0.05 per unit of volatility. If you would invest  82.00  in Australian Agricultural on December 29, 2024 and sell it today you would earn a total of  3.00  from holding Australian Agricultural or generate 3.66% return on investment over 90 days.

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

Air Lease  vs.  Australian Agricultural

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 nearly stable essential indicators, Air Lease is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Australian Agricultural

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Agricultural are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Australian Agricultural is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Air Lease and Australian Agricultural

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

The idea behind Air Lease and Australian Agricultural 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.