Correlation Between Regions Financial and Air Lease

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

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

Diversification Opportunities for Regions Financial and Air Lease

0.92

Correlation Coefficient

Regions Financial  Air Lease

Almost no diversification

The 3 months correlation between Regions and Air is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Regions Financial 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 Regions Financial 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 Regions Financial i.e., Regions Financial and Air Lease go up and down completely randomly.

Pair Corralation between Regions Financial and Air Lease

Assuming the 90 days horizon Regions Financial is expected to generate 0.93 times more return on investment than Air Lease. However, Regions Financial is 1.08 times less risky than Air Lease. It trades about 0.09 of its potential returns per unit of risk. Air Lease is currently generating about 0.06 per unit of risk. If you would invest  1,526  in Regions Financial on October 5, 2024 and sell it today you would earn a total of  734.00  from holding Regions Financial or generate 48.1% return on investment over 90 days.

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

Regions Financial  vs.  Air Lease

Regions Financial

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Regions Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Regions Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 Regions Financial and Air Lease

The main advantage of trading using opposite Regions Financial and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regions Financial 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 Regions Financial 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.