Correlation Between Corporacion America and Willis Lease

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

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

Diversification Opportunities for Corporacion America and Willis Lease

0.09

Correlation Coefficient

Corporacion America  Willis Lease

Significant diversification

The 3 months correlation between Corporacion and Willis is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Corporacion America Airports and Willis Lease Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willis Lease Finance and Corporacion America 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 Corporacion America Airports 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 Finance has no effect on the direction of Corporacion America i.e., Corporacion America and Willis Lease go up and down completely randomly.

Pair Corralation between Corporacion America and Willis Lease

Given the investment horizon of 90 days Corporacion America Airports is expected to under-perform the Willis Lease. But the stock apears to be less risky and, when comparing its historical volatility, Corporacion America Airports is 1.45 times less risky than Willis Lease. The stock trades about -0.04 of its potential returns per unit of risk. The Willis Lease Finance is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  20,457  in Willis Lease Finance on December 21, 2024 and sell it today you would lose (1,863) from holding Willis Lease Finance or give up 9.11% of portfolio value over 90 days.

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

Corporacion America Airports  vs.  Willis Lease Finance

Corporacion America

Risk-Adjusted Performance

Very Weak

Over the last 90 days Corporacion America Airports has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Willis Lease Finance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Willis Lease Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Willis Lease is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Corporacion America and Willis Lease

The main advantage of trading using opposite Corporacion America and Willis Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporacion America 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 Corporacion America Airports and Willis Lease Finance 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.