Correlation Between Global Ship and Willis Lease

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

By analyzing existing cross correlation between Global Ship Lease and Willis Lease Finance, you can compare the effects of market volatilities on Global Ship and Willis Lease 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 Global Ship with a short position of Willis Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and Willis Lease.

Diversification Opportunities for Global Ship and Willis Lease

-0.33

Correlation Coefficient

Global Ship  Willis Lease

Very good diversification

The 3 months correlation between Global and Willis is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and Willis Lease Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willis Lease Finance and Global Ship 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 Global Ship Lease are associated (or correlated) with Willis Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willis Lease Finance has no effect on the direction of Global Ship i.e., Global Ship and Willis Lease go up and down completely randomly.

Pair Corralation between Global Ship and Willis Lease

Considering the 90-day investment horizon Global Ship Lease is expected to under-perform the Willis Lease. But the stock apears to be less risky and, when comparing its historical volatility, Global Ship Lease is 2.54 times less risky than Willis Lease. The stock trades about -0.05 of its potential returns per unit of risk. The Willis Lease Finance is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  10,100  in Willis Lease Finance on September 5, 2024 and sell it today you would earn a total of  10,521  from holding Willis Lease Finance or generate 104.17% return on investment over 90 days.

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

Global Ship Lease  vs.  Willis Lease Finance

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Global Ship is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Willis Lease Finance

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Lease Finance are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Willis Lease exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Ship and Willis Lease

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

The idea behind Global Ship Lease and Willis Lease Finance 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.