Correlation Between FTAI Aviation and Carbon Revolution

Can any of the company-specific risk be diversified away by investing in both FTAI Aviation and Carbon Revolution 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 Carbon Revolution 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 Carbon Revolution Public, you can compare the effects of market volatilities on FTAI Aviation and Carbon Revolution 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 Carbon Revolution. Check out your portfolio center. Please also check ongoing floating volatility patterns of FTAI Aviation and Carbon Revolution.

Diversification Opportunities for FTAI Aviation and Carbon Revolution

0.06

Correlation Coefficient

FTAI Aviation  Carbon Revolution

Significant diversification

The 3 months correlation between FTAI and Carbon is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding FTAI Aviation Ltd and Carbon Revolution Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carbon Revolution Public 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 Carbon Revolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carbon Revolution Public has no effect on the direction of FTAI Aviation i.e., FTAI Aviation and Carbon Revolution go up and down completely randomly.

Pair Corralation between FTAI Aviation and Carbon Revolution

Assuming the 90 days horizon FTAI Aviation is expected to generate 50.26 times less return on investment than Carbon Revolution. But when comparing it to its historical volatility, FTAI Aviation Ltd is 30.26 times less risky than Carbon Revolution. It trades about 0.06 of its potential returns per unit of risk. Carbon Revolution Public is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6.50  in Carbon Revolution Public on October 24, 2024 and sell it today you would lose (0.45) from holding Carbon Revolution Public or give up 6.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	79.67%
Values	Daily Returns

FTAI Aviation Ltd  vs.  Carbon Revolution Public

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 latest stock price disarray, may contribute to short-term losses for the investors.

Carbon Revolution Public

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carbon Revolution Public are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Carbon Revolution showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FTAI Aviation and Carbon Revolution

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

The idea behind FTAI Aviation Ltd and Carbon Revolution Public 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.