Correlation Between Japan Asia and Air Lease

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

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

Diversification Opportunities for Japan Asia and Air Lease

-0.72

Correlation Coefficient

Japan Asia  Air Lease

Pay attention - limited upside

The 3 months correlation between Japan and Air is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Japan Asia Investment and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Japan Asia 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 Japan Asia Investment are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Japan Asia i.e., Japan Asia and Air Lease go up and down completely randomly.

Pair Corralation between Japan Asia and Air Lease

Assuming the 90 days horizon Japan Asia Investment is expected to generate 1.47 times more return on investment than Air Lease. However, Japan Asia is 1.47 times more volatile than Air Lease. It trades about 0.19 of its potential returns per unit of risk. Air Lease is currently generating about -0.05 per unit of risk. If you would invest  122.00  in Japan Asia Investment on December 19, 2024 and sell it today you would earn a total of  41.00  from holding Japan Asia Investment or generate 33.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Japan Asia Investment  vs.  Air Lease

Japan Asia Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Asia Investment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Japan Asia reported solid returns over the last few months and may actually be approaching a breakup point.

Air Lease

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Japan Asia and Air Lease

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

The idea behind Japan Asia Investment and Air 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.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.