Correlation Between Consolidated Communications and WILLIS LEASE

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

By analyzing existing cross correlation between Consolidated Communications Holdings and WILLIS LEASE FIN, you can compare the effects of market volatilities on Consolidated Communications and WILLIS 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 Consolidated Communications with a short position of WILLIS LEASE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Communications and WILLIS LEASE.

Diversification Opportunities for Consolidated Communications and WILLIS LEASE

0.76

Correlation Coefficient

Consolidated Communications  WILLIS LEASE

Poor diversification

The 3 months correlation between Consolidated and WILLIS is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and WILLIS LEASE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WILLIS LEASE FIN and Consolidated Communications 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 Consolidated Communications Holdings are associated (or correlated) with WILLIS LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WILLIS LEASE FIN has no effect on the direction of Consolidated Communications i.e., Consolidated Communications and WILLIS LEASE go up and down completely randomly.

Pair Corralation between Consolidated Communications and WILLIS LEASE

Assuming the 90 days horizon Consolidated Communications Holdings is expected to generate 0.17 times more return on investment than WILLIS LEASE. However, Consolidated Communications Holdings is 5.86 times less risky than WILLIS LEASE. It trades about 0.16 of its potential returns per unit of risk. WILLIS LEASE FIN is currently generating about 0.03 per unit of risk. If you would invest  422.00  in Consolidated Communications Holdings on October 20, 2024 and sell it today you would earn a total of  26.00  from holding Consolidated Communications Holdings or generate 6.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	81.67%
Values	Daily Returns

Consolidated Communications Ho  vs.  WILLIS LEASE FIN

Consolidated Communications

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Consolidated Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

WILLIS LEASE FIN

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, WILLIS LEASE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Consolidated Communications and WILLIS LEASE

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

The idea behind Consolidated Communications Holdings and WILLIS LEASE FIN 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.