Correlation Between Air Transport and Air Lease

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

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

Diversification Opportunities for Air Transport and Air Lease

0.91

Correlation Coefficient

Air Transport  Air Lease

Almost no diversification

The 3 months correlation between Air and Air is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Air Transport 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 Transport Services are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Air Transport i.e., Air Transport and Air Lease go up and down completely randomly.

Pair Corralation between Air Transport and Air Lease

Assuming the 90 days horizon Air Transport Services is expected to generate 2.28 times more return on investment than Air Lease. However, Air Transport is 2.28 times more volatile than Air Lease. It trades about 0.18 of its potential returns per unit of risk. Air Lease is currently generating about 0.2 per unit of risk. If you would invest  1,410  in Air Transport Services on September 4, 2024 and sell it today you would earn a total of  670.00  from holding Air Transport Services or generate 47.52% return on investment over 90 days.

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

Air Transport Services  vs.  Air Lease

Air Transport Services

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Air Lease

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 15 (%) 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.

Pair Trading with Air Transport and Air Lease

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

The idea behind Air Transport Services and Air Lease 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.