Correlation Between WILLIS LEASE and ELEMENT FLEET

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

By analyzing existing cross correlation between WILLIS LEASE FIN and ELEMENT FLEET MGMT, you can compare the effects of market volatilities on WILLIS LEASE and ELEMENT FLEET 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 WILLIS LEASE with a short position of ELEMENT FLEET. Check out your portfolio center. Please also check ongoing floating volatility patterns of WILLIS LEASE and ELEMENT FLEET.

Diversification Opportunities for WILLIS LEASE and ELEMENT FLEET

0.53

Correlation Coefficient

WILLIS LEASE  ELEMENT FLEET

Very weak diversification

The 3 months correlation between WILLIS and ELEMENT is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and ELEMENT FLEET MGMT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELEMENT FLEET MGMT and WILLIS LEASE 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 WILLIS LEASE FIN are associated (or correlated) with ELEMENT FLEET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELEMENT FLEET MGMT has no effect on the direction of WILLIS LEASE i.e., WILLIS LEASE and ELEMENT FLEET go up and down completely randomly.

Pair Corralation between WILLIS LEASE and ELEMENT FLEET

Assuming the 90 days horizon WILLIS LEASE FIN is expected to generate 1.46 times more return on investment than ELEMENT FLEET. However, WILLIS LEASE is 1.46 times more volatile than ELEMENT FLEET MGMT. It trades about 0.1 of its potential returns per unit of risk. ELEMENT FLEET MGMT is currently generating about 0.05 per unit of risk. If you would invest  5,535  in WILLIS LEASE FIN on September 27, 2024 and sell it today you would earn a total of  13,765  from holding WILLIS LEASE FIN or generate 248.69% return on investment over 90 days.

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

WILLIS LEASE FIN  vs.  ELEMENT FLEET MGMT

WILLIS LEASE FIN

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WILLIS LEASE reported solid returns over the last few months and may actually be approaching a breakup point.

ELEMENT FLEET MGMT

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ELEMENT FLEET MGMT are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ELEMENT FLEET is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WILLIS LEASE and ELEMENT FLEET

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

The idea behind WILLIS LEASE FIN and ELEMENT FLEET MGMT 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.