Correlation Between Air Lease and Brown Brown

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

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

Diversification Opportunities for Air Lease and Brown Brown

0.73

Correlation Coefficient

Air Lease  Brown Brown

Poor diversification

The 3 months correlation between Air and Brown is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Brown Brown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Brown 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 Brown Brown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Brown has no effect on the direction of Air Lease i.e., Air Lease and Brown Brown go up and down completely randomly.

Pair Corralation between Air Lease and Brown Brown

Assuming the 90 days trading horizon Air Lease is expected to generate 1.15 times more return on investment than Brown Brown. However, Air Lease is 1.15 times more volatile than Brown Brown. It trades about 0.1 of its potential returns per unit of risk. Brown Brown is currently generating about 0.03 per unit of risk. If you would invest  3,981  in Air Lease on October 15, 2024 and sell it today you would earn a total of  399.00  from holding Air Lease or generate 10.02% return on investment over 90 days.

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

Air Lease  vs.  Brown Brown

Air Lease

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Brown Brown

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Brown are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Brown Brown 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 Brown Brown

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

The idea behind Air Lease and Brown Brown 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.