Correlation Between China Aircraft and Air Lease

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

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

Diversification Opportunities for China Aircraft and Air Lease

-0.62

Correlation Coefficient

China Aircraft  Air Lease

Excellent diversification

The 3 months correlation between China and Air is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding China Aircraft Leasing and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and China Aircraft 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 China Aircraft Leasing 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 China Aircraft i.e., China Aircraft and Air Lease go up and down completely randomly.

Pair Corralation between China Aircraft and Air Lease

Assuming the 90 days horizon China Aircraft Leasing is expected to under-perform the Air Lease. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Aircraft Leasing is 1.72 times less risky than Air Lease. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Air Lease is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,365  in Air Lease on September 13, 2024 and sell it today you would earn a total of  646.00  from holding Air Lease or generate 14.8% return on investment over 90 days.

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

China Aircraft Leasing  vs.  Air Lease

China Aircraft Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Aircraft Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Air Lease

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Air Lease disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Aircraft and Air Lease

The main advantage of trading using opposite China Aircraft and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Aircraft 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 China Aircraft Leasing 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..