Correlation Between FTAI Aviation and Jiangsu Expressway

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

Diversification Opportunities for FTAI Aviation and Jiangsu Expressway

0.04

Correlation Coefficient

FTAI Aviation  Jiangsu Expressway

Significant diversification

The 3 months correlation between FTAI and Jiangsu is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding FTAI Aviation Ltd and Jiangsu Expressway Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Expressway 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 Jiangsu Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Expressway has no effect on the direction of FTAI Aviation i.e., FTAI Aviation and Jiangsu Expressway go up and down completely randomly.

Pair Corralation between FTAI Aviation and Jiangsu Expressway

Assuming the 90 days horizon FTAI Aviation is expected to generate 2.67 times less return on investment than Jiangsu Expressway. But when comparing it to its historical volatility, FTAI Aviation Ltd is 5.0 times less risky than Jiangsu Expressway. It trades about 0.09 of its potential returns per unit of risk. Jiangsu Expressway Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,721  in Jiangsu Expressway Co on September 24, 2024 and sell it today you would earn a total of  506.00  from holding Jiangsu Expressway Co or generate 29.4% return on investment over 90 days.

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

FTAI Aviation Ltd  vs.  Jiangsu Expressway Co

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.

Jiangsu Expressway

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Expressway Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Jiangsu Expressway showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FTAI Aviation and Jiangsu Expressway

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

The idea behind FTAI Aviation Ltd and Jiangsu Expressway Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.