Correlation Between Micro Leasing and Lease IT

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

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

Diversification Opportunities for Micro Leasing and Lease IT

0.89

Correlation Coefficient

Micro Leasing  Lease IT

Very poor diversification

The 3 months correlation between Micro and Lease is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Micro Leasing Public and Lease IT Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lease IT Public and Micro Leasing 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 Micro Leasing Public are associated (or correlated) with Lease IT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lease IT Public has no effect on the direction of Micro Leasing i.e., Micro Leasing and Lease IT go up and down completely randomly.

Pair Corralation between Micro Leasing and Lease IT

Assuming the 90 days trading horizon Micro Leasing Public is expected to under-perform the Lease IT. In addition to that, Micro Leasing is 1.19 times more volatile than Lease IT Public. It trades about -0.17 of its total potential returns per unit of risk. Lease IT Public is currently generating about -0.17 per unit of volatility. If you would invest  108.00  in Lease IT Public on September 13, 2024 and sell it today you would lose (31.00) from holding Lease IT Public or give up 28.7% of portfolio value over 90 days.

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

Micro Leasing Public  vs.  Lease IT Public

Micro Leasing Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Micro Leasing Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lease IT Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lease IT Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Micro Leasing and Lease IT

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

The idea behind Micro Leasing Public and Lease IT Public 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.