Correlation Between Eastern and FTAI Aviation

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

By analyzing existing cross correlation between Eastern Co and FTAI Aviation Ltd, you can compare the effects of market volatilities on Eastern and FTAI Aviation 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 Eastern with a short position of FTAI Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and FTAI Aviation.

Diversification Opportunities for Eastern and FTAI Aviation

-0.5

Correlation Coefficient

Eastern  FTAI Aviation

Very good diversification

The 3 months correlation between Eastern and FTAI is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and FTAI Aviation Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Aviation and Eastern 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 Eastern Co are associated (or correlated) with FTAI Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Aviation has no effect on the direction of Eastern i.e., Eastern and FTAI Aviation go up and down completely randomly.

Pair Corralation between Eastern and FTAI Aviation

Considering the 90-day investment horizon Eastern Co is expected to generate 1.67 times more return on investment than FTAI Aviation. However, Eastern is 1.67 times more volatile than FTAI Aviation Ltd. It trades about 0.02 of its potential returns per unit of risk. FTAI Aviation Ltd is currently generating about -0.12 per unit of risk. If you would invest  2,759  in Eastern Co on October 21, 2024 and sell it today you would earn a total of  11.00  from holding Eastern Co or generate 0.4% return on investment over 90 days.

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

Eastern Co  vs.  FTAI Aviation Ltd

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

FTAI Aviation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FTAI Aviation Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, FTAI Aviation is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eastern and FTAI Aviation

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

The idea behind Eastern Co and FTAI Aviation Ltd 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..