Correlation Between CF Industries and AerSale Corp

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

By analyzing existing cross correlation between CF Industries Holdings and AerSale Corp, you can compare the effects of market volatilities on CF Industries and AerSale Corp 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 CF Industries with a short position of AerSale Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and AerSale Corp.

Diversification Opportunities for CF Industries and AerSale Corp

0.68

Correlation Coefficient

CF Industries  AerSale Corp

Poor diversification

The 3 months correlation between CF Industries and AerSale is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and AerSale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerSale Corp and CF Industries 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 CF Industries Holdings are associated (or correlated) with AerSale Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerSale Corp has no effect on the direction of CF Industries i.e., CF Industries and AerSale Corp go up and down completely randomly.

Pair Corralation between CF Industries and AerSale Corp

Allowing for the 90-day total investment horizon CF Industries is expected to generate 1.41 times less return on investment than AerSale Corp. But when comparing it to its historical volatility, CF Industries Holdings is 1.29 times less risky than AerSale Corp. It trades about 0.14 of its potential returns per unit of risk. AerSale Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  533.00  in AerSale Corp on October 23, 2024 and sell it today you would earn a total of  122.00  from holding AerSale Corp or generate 22.89% return on investment over 90 days.

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

CF Industries Holdings  vs.  AerSale Corp

CF Industries Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CF Industries reported solid returns over the last few months and may actually be approaching a breakup point.

AerSale Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AerSale Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, AerSale Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CF Industries and AerSale Corp

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

The idea behind CF Industries Holdings and AerSale Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.