Correlation Between Air Lease and US Physical

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

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

Diversification Opportunities for Air Lease and US Physical

0.73

Correlation Coefficient

Air Lease  US Physical

Poor diversification

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

Pair Corralation between Air Lease and US Physical

Assuming the 90 days trading horizon Air Lease is expected to generate 1.07 times more return on investment than US Physical. However, Air Lease is 1.07 times more volatile than US Physical Therapy. It trades about -0.05 of its potential returns per unit of risk. US Physical Therapy is currently generating about -0.21 per unit of risk. If you would invest  4,538  in Air Lease on December 19, 2024 and sell it today you would lose (298.00) from holding Air Lease or give up 6.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Air Lease  vs.  US Physical Therapy

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 nearly stable essential indicators, Air Lease is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

US Physical Therapy

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Physical Therapy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Air Lease and US Physical

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

The idea behind Air Lease and US Physical Therapy 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.