Correlation Between FTAI Aviation and CVW CleanTech

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

Diversification Opportunities for FTAI Aviation and CVW CleanTech

-0.39

Correlation Coefficient

FTAI Aviation  CVW CleanTech

Very good diversification

The 3 months correlation between FTAI and CVW is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding FTAI Aviation Ltd and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech 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 CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of FTAI Aviation i.e., FTAI Aviation and CVW CleanTech go up and down completely randomly.

Pair Corralation between FTAI Aviation and CVW CleanTech

Assuming the 90 days horizon FTAI Aviation is expected to generate 3.86 times less return on investment than CVW CleanTech. But when comparing it to its historical volatility, FTAI Aviation Ltd is 10.12 times less risky than CVW CleanTech. It trades about 0.09 of its potential returns per unit of risk. CVW CleanTech is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  58.00  in CVW CleanTech on September 28, 2024 and sell it today you would lose (1.00) from holding CVW CleanTech or give up 1.72% of portfolio value over 90 days.

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

FTAI Aviation Ltd  vs.  CVW CleanTech

FTAI Aviation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FTAI Aviation Ltd are ranked lower than 6 (%) 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 newest stock price disarray, may contribute to short-term losses for the investors.

CVW CleanTech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVW CleanTech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with FTAI Aviation and CVW CleanTech

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

The idea behind FTAI Aviation Ltd and CVW CleanTech 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.