Correlation Between RELIANCE and Air Lease

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

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

Diversification Opportunities for RELIANCE and Air Lease

0.24

Correlation Coefficient

RELIANCE  Air Lease

Modest diversification

The 3 months correlation between RELIANCE and Air is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STL ALUM and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and RELIANCE 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 RELIANCE STL ALUM 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 RELIANCE i.e., RELIANCE and Air Lease go up and down completely randomly.

Pair Corralation between RELIANCE and Air Lease

Assuming the 90 days trading horizon RELIANCE STL ALUM is expected to under-perform the Air Lease. In addition to that, RELIANCE is 1.45 times more volatile than Air Lease. It trades about -0.19 of its total potential returns per unit of risk. Air Lease is currently generating about 0.09 per unit of volatility. If you would invest  4,509  in Air Lease on September 30, 2024 and sell it today you would earn a total of  381.00  from holding Air Lease or generate 8.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	39.06%
Values	Daily Returns

RELIANCE STL ALUM  vs.  Air Lease

RELIANCE STL ALUM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RELIANCE STL ALUM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for RELIANCE STL ALUM investors.

Air Lease

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RELIANCE and Air Lease

The main advantage of trading using opposite RELIANCE and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RELIANCE 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 RELIANCE STL ALUM 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.