Correlation Between Air Lease and Marsh McLennan

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

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

Diversification Opportunities for Air Lease and Marsh McLennan

0.7

Correlation Coefficient

Air Lease  Marsh McLennan

Poor diversification

The 3 months correlation between Air and Marsh is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Marsh McLennan Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marsh McLennan Companies 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 Marsh McLennan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marsh McLennan Companies has no effect on the direction of Air Lease i.e., Air Lease and Marsh McLennan go up and down completely randomly.

Pair Corralation between Air Lease and Marsh McLennan

Assuming the 90 days trading horizon Air Lease is expected to generate 1.43 times more return on investment than Marsh McLennan. However, Air Lease is 1.43 times more volatile than Marsh McLennan Companies. It trades about 0.17 of its potential returns per unit of risk. Marsh McLennan Companies is currently generating about -0.01 per unit of risk. If you would invest  4,101  in Air Lease on September 27, 2024 and sell it today you would earn a total of  539.00  from holding Air Lease or generate 13.14% 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.  Marsh McLennan Companies

Air Lease

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Air Lease reported solid returns over the last few months and may actually be approaching a breakup point.

Marsh McLennan Companies

Risk-Adjusted Performance

2 of 100

Weak

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

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

The idea behind Air Lease and Marsh McLennan Companies 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.