Correlation Between AerCap Holdings and Grupo Aeroportuario

Can any of the company-specific risk be diversified away by investing in both AerCap Holdings and Grupo Aeroportuario 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 Grupo Aeroportuario 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 Grupo Aeroportuario del, you can compare the effects of market volatilities on AerCap Holdings and Grupo Aeroportuario 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 Grupo Aeroportuario. Check out your portfolio center. Please also check ongoing floating volatility patterns of AerCap Holdings and Grupo Aeroportuario.

Diversification Opportunities for AerCap Holdings and Grupo Aeroportuario

0.55

Correlation Coefficient

AerCap Holdings  Grupo Aeroportuario

Very weak diversification

The 3 months correlation between AerCap and Grupo is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding AerCap Holdings NV and Grupo Aeroportuario del in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Aeroportuario del 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 Grupo Aeroportuario. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Aeroportuario del has no effect on the direction of AerCap Holdings i.e., AerCap Holdings and Grupo Aeroportuario go up and down completely randomly.

Pair Corralation between AerCap Holdings and Grupo Aeroportuario

Assuming the 90 days horizon AerCap Holdings NV is expected to generate 0.59 times more return on investment than Grupo Aeroportuario. However, AerCap Holdings NV is 1.71 times less risky than Grupo Aeroportuario. It trades about 0.1 of its potential returns per unit of risk. Grupo Aeroportuario del is currently generating about 0.03 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	Weak
Accuracy	100.0%
Values	Daily Returns

AerCap Holdings NV  vs.  Grupo Aeroportuario del

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.

Grupo Aeroportuario del

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aeroportuario del are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Grupo Aeroportuario is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AerCap Holdings and Grupo Aeroportuario

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

The idea behind AerCap Holdings NV and Grupo Aeroportuario del 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.