Correlation Between HE Equipment and AerCap Holdings

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

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

Diversification Opportunities for HE Equipment and AerCap Holdings

0.59

Correlation Coefficient

HE Equipment  AerCap Holdings

Very weak diversification

The 3 months correlation between HEES and AerCap is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services 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 HE Equipment 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 HE Equipment Services 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 HE Equipment i.e., HE Equipment and AerCap Holdings go up and down completely randomly.

Pair Corralation between HE Equipment and AerCap Holdings

Given the investment horizon of 90 days HE Equipment Services is expected to generate 11.31 times more return on investment than AerCap Holdings. However, HE Equipment is 11.31 times more volatile than AerCap Holdings NV. It trades about 0.1 of its potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.07 per unit of risk. If you would invest  5,817  in HE Equipment Services on December 1, 2024 and sell it today you would earn a total of  3,773  from holding HE Equipment Services or generate 64.86% return on investment over 90 days.

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

HE Equipment Services  vs.  AerCap Holdings NV

HE Equipment Services

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, HE Equipment unveiled solid returns over the last few months and may actually be approaching a breakup point.

AerCap Holdings NV

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, AerCap Holdings is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with HE Equipment and AerCap Holdings

The main advantage of trading using opposite HE Equipment and AerCap Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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 HE Equipment Services 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.