Correlation Between CAP LEASE and Investment Company

Can any of the company-specific risk be diversified away by investing in both CAP LEASE and Investment Company 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 Investment Company 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 The Investment, you can compare the effects of market volatilities on CAP LEASE and Investment Company 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 Investment Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAP LEASE and Investment Company.

Diversification Opportunities for CAP LEASE and Investment Company

0.58

Correlation Coefficient

CAP LEASE  Investment Company

Very weak diversification

The 3 months correlation between CAP and Investment is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding CAP LEASE AVIATION and The Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Company 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 Investment Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Company has no effect on the direction of CAP LEASE i.e., CAP LEASE and Investment Company go up and down completely randomly.

Pair Corralation between CAP LEASE and Investment Company

Assuming the 90 days trading horizon CAP LEASE AVIATION is expected to under-perform the Investment Company. In addition to that, CAP LEASE is 4.59 times more volatile than The Investment. It trades about -0.08 of its total potential returns per unit of risk. The Investment is currently generating about -0.17 per unit of volatility. If you would invest  7,420  in The Investment on December 30, 2024 and sell it today you would lose (720.00) from holding The Investment or give up 9.7% of portfolio value over 90 days.

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

CAP LEASE AVIATION  vs.  The Investment

CAP LEASE AVIATION

Risk-Adjusted Performance

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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Investment Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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 Investment Company

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

The idea behind CAP LEASE AVIATION and The Investment 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.