Correlation Between CAP LEASE and Aberforth Smaller

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

By analyzing existing cross correlation between CAP LEASE AVIATION and Aberforth Smaller Companies, you can compare the effects of market volatilities on CAP LEASE and Aberforth Smaller 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 CAP LEASE with a short position of Aberforth Smaller. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAP LEASE and Aberforth Smaller.

Diversification Opportunities for CAP LEASE and Aberforth Smaller

0.76

Correlation Coefficient

CAP LEASE  Aberforth Smaller

Poor diversification

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

Pair Corralation between CAP LEASE and Aberforth Smaller

Assuming the 90 days trading horizon CAP LEASE AVIATION is expected to under-perform the Aberforth Smaller. In addition to that, CAP LEASE is 2.24 times more volatile than Aberforth Smaller Companies. It trades about -0.14 of its total potential returns per unit of risk. Aberforth Smaller Companies is currently generating about 0.11 per unit of volatility. If you would invest  145,000  in Aberforth Smaller Companies on September 16, 2024 and sell it today you would earn a total of  2,600  from holding Aberforth Smaller Companies or generate 1.79% return on investment over 90 days.

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

CAP LEASE AVIATION  vs.  Aberforth Smaller Companies

CAP LEASE AVIATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAP LEASE AVIATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Aberforth Smaller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberforth Smaller Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with CAP LEASE and Aberforth Smaller

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

The idea behind CAP LEASE AVIATION and Aberforth Smaller Companies 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.