Correlation Between SM Investments and Willis Lease

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

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

Diversification Opportunities for SM Investments and Willis Lease

0.21

Correlation Coefficient

SM Investments  Willis Lease

Modest diversification

The 3 months correlation between SVTMF and Willis is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments and Willis Lease Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willis Lease Finance and SM Investments 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 SM Investments are associated (or correlated) with Willis Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willis Lease Finance has no effect on the direction of SM Investments i.e., SM Investments and Willis Lease go up and down completely randomly.

Pair Corralation between SM Investments and Willis Lease

Assuming the 90 days horizon SM Investments is expected to under-perform the Willis Lease. But the pink sheet apears to be less risky and, when comparing its historical volatility, SM Investments is 2.31 times less risky than Willis Lease. The pink sheet trades about -0.2 of its potential returns per unit of risk. The Willis Lease Finance is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  19,845  in Willis Lease Finance on December 19, 2024 and sell it today you would lose (1,956) from holding Willis Lease Finance or give up 9.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.44%
Values	Daily Returns

SM Investments  vs.  Willis Lease Finance

SM Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days SM Investments 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 primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Willis Lease Finance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Willis Lease Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with SM Investments and Willis Lease

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

The idea behind SM Investments and Willis Lease Finance 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.