Correlation Between FTAI Aviation and AerCap Holdings

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

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

Diversification Opportunities for FTAI Aviation and AerCap Holdings

0.43

Correlation Coefficient

FTAI Aviation  AerCap Holdings

Very weak diversification

The 3 months correlation between FTAI and AerCap is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding FTAI Aviation Ltd and AerCap Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerCap Holdings NV and FTAI Aviation 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 FTAI Aviation Ltd are associated (or correlated) with AerCap Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerCap Holdings NV has no effect on the direction of FTAI Aviation i.e., FTAI Aviation and AerCap Holdings go up and down completely randomly.

Pair Corralation between FTAI Aviation and AerCap Holdings

Assuming the 90 days horizon FTAI Aviation is expected to generate 1.77 times less return on investment than AerCap Holdings. But when comparing it to its historical volatility, FTAI Aviation Ltd is 1.23 times less risky than AerCap Holdings. It trades about 0.05 of its potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,749  in AerCap Holdings NV on September 23, 2024 and sell it today you would earn a total of  3,704  from holding AerCap Holdings NV or generate 64.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.95%
Values	Daily Returns

FTAI Aviation Ltd  vs.  AerCap Holdings NV

FTAI Aviation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FTAI Aviation Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, FTAI Aviation is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

AerCap Holdings NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AerCap Holdings NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, AerCap Holdings is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with FTAI Aviation and AerCap Holdings

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

The idea behind FTAI Aviation Ltd and AerCap Holdings NV 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.