Correlation Between National Bank and Air Lease

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

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

Diversification Opportunities for National Bank and Air Lease

0.85

Correlation Coefficient

National Bank  Air Lease

Very poor diversification

The 3 months correlation between National and Air is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and Air Lease go up and down completely randomly.

Pair Corralation between National Bank and Air Lease

Assuming the 90 days horizon National Bank is expected to generate 1.43 times less return on investment than Air Lease. In addition to that, National Bank is 1.56 times more volatile than Air Lease. It trades about 0.08 of its total potential returns per unit of risk. Air Lease is currently generating about 0.18 per unit of volatility. If you would invest  3,902  in Air Lease on October 5, 2024 and sell it today you would earn a total of  718.00  from holding Air Lease or generate 18.4% return on investment over 90 days.

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

National Bank Holdings  vs.  Air Lease

National Bank Holdings

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, National Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Air Lease

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Air Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile essential indicators, Air Lease reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and Air Lease

The main advantage of trading using opposite National Bank and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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 National Bank Holdings 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.