Correlation Between Custom Truck and Willis Lease

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

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

Diversification Opportunities for Custom Truck and Willis Lease

-0.06

Correlation Coefficient

Custom Truck  Willis Lease

Good diversification

The 3 months correlation between Custom and Willis is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Custom Truck One 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 Custom Truck 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 Custom Truck One 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 Custom Truck i.e., Custom Truck and Willis Lease go up and down completely randomly.

Pair Corralation between Custom Truck and Willis Lease

Given the investment horizon of 90 days Custom Truck One is expected to generate 1.19 times more return on investment than Willis Lease. However, Custom Truck is 1.19 times more volatile than Willis Lease Finance. It trades about -0.01 of its potential returns per unit of risk. Willis Lease Finance is currently generating about -0.09 per unit of risk. If you would invest  481.00  in Custom Truck One on December 28, 2024 and sell it today you would lose (36.00) from holding Custom Truck One or give up 7.48% of portfolio value over 90 days.

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

Custom Truck One  vs.  Willis Lease Finance

Custom Truck One

Risk-Adjusted Performance

Very Weak

Over the last 90 days Custom Truck One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Custom Truck is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private 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 weak 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.

Pair Trading with Custom Truck and Willis Lease

The main advantage of trading using opposite Custom Truck and Willis Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Custom Truck 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 Custom Truck One 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.