Correlation Between SOUTHERN and Air Lease

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

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

Diversification Opportunities for SOUTHERN and Air Lease

-0.45

Correlation Coefficient

SOUTHERN  Air Lease

Very good diversification

The 3 months correlation between SOUTHERN and Air is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHERN PER CORP and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and SOUTHERN 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 SOUTHERN PER CORP 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 SOUTHERN i.e., SOUTHERN and Air Lease go up and down completely randomly.

Pair Corralation between SOUTHERN and Air Lease

Assuming the 90 days trading horizon SOUTHERN PER CORP is expected to under-perform the Air Lease. But the bond apears to be less risky and, when comparing its historical volatility, SOUTHERN PER CORP is 1.38 times less risky than Air Lease. The bond trades about -0.03 of its potential returns per unit of risk. The Air Lease is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,802  in Air Lease on September 20, 2024 and sell it today you would earn a total of  106.00  from holding Air Lease or generate 2.21% return on investment over 90 days.

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

SOUTHERN PER CORP  vs.  Air Lease

SOUTHERN PER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOUTHERN PER CORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SOUTHERN is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Air Lease

Risk-Adjusted Performance

6 of 100

Weak

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 unsteady essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SOUTHERN and Air Lease

The main advantage of trading using opposite SOUTHERN and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHERN 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 SOUTHERN PER CORP 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.