Correlation Between AerCap Holdings and Aena SME

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

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

Diversification Opportunities for AerCap Holdings and Aena SME

0.71

Correlation Coefficient

AerCap Holdings  Aena SME

Poor diversification

The 3 months correlation between AerCap and Aena is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding AerCap Holdings NV and Aena SME SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aena SME SA and AerCap Holdings 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 AerCap Holdings NV are associated (or correlated) with Aena SME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aena SME SA has no effect on the direction of AerCap Holdings i.e., AerCap Holdings and Aena SME go up and down completely randomly.

Pair Corralation between AerCap Holdings and Aena SME

Assuming the 90 days horizon AerCap Holdings NV is expected to generate 1.31 times more return on investment than Aena SME. However, AerCap Holdings is 1.31 times more volatile than Aena SME SA. It trades about 0.1 of its potential returns per unit of risk. Aena SME SA is currently generating about 0.08 per unit of risk. If you would invest  5,055  in AerCap Holdings NV on December 2, 2024 and sell it today you would earn a total of  4,843  from holding AerCap Holdings NV or generate 95.81% return on investment over 90 days.

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

AerCap Holdings NV  vs.  Aena SME SA

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. Despite nearly stable basic indicators, AerCap Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Aena SME SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aena SME SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aena SME is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AerCap Holdings and Aena SME

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

The idea behind AerCap Holdings NV and Aena SME SA 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.