Correlation Between Valhi and Air Lease

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

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

Diversification Opportunities for Valhi and Air Lease

-0.76

Correlation Coefficient

Valhi  Air Lease

Pay attention - limited upside

The 3 months correlation between Valhi and Air is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Valhi 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 Valhi Inc 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 Valhi i.e., Valhi and Air Lease go up and down completely randomly.

Pair Corralation between Valhi and Air Lease

Considering the 90-day investment horizon Valhi Inc is expected to generate 2.05 times more return on investment than Air Lease. However, Valhi is 2.05 times more volatile than Air Lease. It trades about 0.02 of its potential returns per unit of risk. Air Lease is currently generating about 0.03 per unit of risk. If you would invest  2,313  in Valhi Inc on October 10, 2024 and sell it today you would lose (78.00) from holding Valhi Inc or give up 3.37% of portfolio value over 90 days.

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

Valhi Inc  vs.  Air Lease

Valhi Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valhi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Air Lease

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Air Lease disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valhi and Air Lease

The main advantage of trading using opposite Valhi and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valhi 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 Valhi Inc 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.