Correlation Between FTAI Aviation and First Ship

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

Diversification Opportunities for FTAI Aviation and First Ship

0.0

Correlation Coefficient

FTAI Aviation  First Ship

Pay attention - limited upside

The 3 months correlation between FTAI and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding FTAI Aviation Ltd and First Ship Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Ship Lease 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 First Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Ship Lease has no effect on the direction of FTAI Aviation i.e., FTAI Aviation and First Ship go up and down completely randomly.

Pair Corralation between FTAI Aviation and First Ship

Assuming the 90 days horizon FTAI Aviation is expected to generate 1.71 times less return on investment than First Ship. But when comparing it to its historical volatility, FTAI Aviation Ltd is 2.11 times less risky than First Ship. It trades about 0.06 of its potential returns per unit of risk. First Ship Lease is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2.50  in First Ship Lease on August 31, 2024 and sell it today you would earn a total of  1.50  from holding First Ship Lease or generate 60.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	88.08%
Values	Daily Returns

FTAI Aviation Ltd  vs.  First Ship Lease

FTAI Aviation

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FTAI Aviation Ltd are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, FTAI Aviation may actually be approaching a critical reversion point that can send shares even higher in December 2024.

First Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Ship is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FTAI Aviation and First Ship

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

The idea behind FTAI Aviation Ltd and First Ship Lease 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.