Correlation Between Air Lease and ELECTRONIC ARTS

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

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

Diversification Opportunities for Air Lease and ELECTRONIC ARTS

0.34

Correlation Coefficient

Air Lease  ELECTRONIC ARTS

Weak diversification

The 3 months correlation between Air and ELECTRONIC is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and ELECTRONIC ARTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTRONIC ARTS 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 ELECTRONIC ARTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELECTRONIC ARTS has no effect on the direction of Air Lease i.e., Air Lease and ELECTRONIC ARTS go up and down completely randomly.

Pair Corralation between Air Lease and ELECTRONIC ARTS

Assuming the 90 days trading horizon Air Lease is expected to generate 0.8 times more return on investment than ELECTRONIC ARTS. However, Air Lease is 1.25 times less risky than ELECTRONIC ARTS. It trades about -0.05 of its potential returns per unit of risk. ELECTRONIC ARTS is currently generating about -0.04 per unit of risk. If you would invest  4,638  in Air Lease on December 24, 2024 and sell it today you would lose (318.00) from holding Air Lease or give up 6.86% of portfolio value over 90 days.

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

Air Lease  vs.  ELECTRONIC ARTS

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 latest unsteady performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ELECTRONIC ARTS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ELECTRONIC ARTS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Air Lease and ELECTRONIC ARTS

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

The idea behind Air Lease and ELECTRONIC ARTS 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.