Correlation Between Air Lease and Booking Holdings

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

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

Diversification Opportunities for Air Lease and Booking Holdings

0.92

Correlation Coefficient

Air Lease  Booking Holdings

Almost no diversification

The 3 months correlation between Air and Booking is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings 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 Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of Air Lease i.e., Air Lease and Booking Holdings go up and down completely randomly.

Pair Corralation between Air Lease and Booking Holdings

Assuming the 90 days trading horizon Air Lease is expected to under-perform the Booking Holdings. In addition to that, Air Lease is 1.1 times more volatile than Booking Holdings. It trades about -0.1 of its total potential returns per unit of risk. Booking Holdings is currently generating about -0.08 per unit of volatility. If you would invest  486,000  in Booking Holdings on October 23, 2024 and sell it today you would lose (9,400) from holding Booking Holdings or give up 1.93% of portfolio value over 90 days.

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

Air Lease  vs.  Booking Holdings

Air Lease

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 9 (%) 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.

Booking Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Booking Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Booking Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Lease and Booking Holdings

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

The idea behind Air Lease and Booking 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.