Correlation Between Alphabet and AerCap Holdings

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

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

Diversification Opportunities for Alphabet and AerCap Holdings

-0.29

Correlation Coefficient

Alphabet  AerCap Holdings

Very good diversification

The 3 months correlation between Alphabet and AerCap is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C 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 Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and AerCap Holdings go up and down completely randomly.

Pair Corralation between Alphabet and AerCap Holdings

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the AerCap Holdings. In addition to that, Alphabet is 1.3 times more volatile than AerCap Holdings NV. It trades about -0.09 of its total potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.05 per unit of volatility. If you would invest  9,111  in AerCap Holdings NV on December 27, 2024 and sell it today you would earn a total of  391.00  from holding AerCap Holdings NV or generate 4.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Alphabet Inc Class C  vs.  AerCap Holdings NV

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AerCap Holdings NV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AerCap Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alphabet and AerCap Holdings

The main advantage of trading using opposite Alphabet and AerCap Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.