Correlation Between Air Lease and Consolidated Communications

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

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

Diversification Opportunities for Air Lease and Consolidated Communications

0.93

Correlation Coefficient

Air Lease  Consolidated Communications

Almost no diversification

The 3 months correlation between Air and Consolidated is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Consolidated Communications Ho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Communications 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 Consolidated Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Communications has no effect on the direction of Air Lease i.e., Air Lease and Consolidated Communications go up and down completely randomly.

Pair Corralation between Air Lease and Consolidated Communications

Assuming the 90 days trading horizon Air Lease is expected to generate 2.21 times more return on investment than Consolidated Communications. However, Air Lease is 2.21 times more volatile than Consolidated Communications Holdings. It trades about 0.18 of its potential returns per unit of risk. Consolidated Communications Holdings is currently generating about 0.18 per unit of risk. If you would invest  3,922  in Air Lease on September 16, 2024 and sell it today you would earn a total of  758.00  from holding Air Lease or generate 19.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.48%
Values	Daily Returns

Air Lease  vs.  Consolidated Communications Ho

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 fragile essential indicators, Air Lease reported solid returns over the last few months and may actually be approaching a breakup point.

Consolidated Communications

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Communications Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Air Lease and Consolidated Communications

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

The idea behind Air Lease and Consolidated Communications 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.