Correlation Between WILLIS LEASE and CDL INVESTMENT

Can any of the company-specific risk be diversified away by investing in both WILLIS LEASE and CDL INVESTMENT 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 CDL INVESTMENT 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 CDL INVESTMENT, you can compare the effects of market volatilities on WILLIS LEASE and CDL INVESTMENT 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 CDL INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of WILLIS LEASE and CDL INVESTMENT.

Diversification Opportunities for WILLIS LEASE and CDL INVESTMENT

0.27

Correlation Coefficient

WILLIS LEASE  CDL INVESTMENT

Modest diversification

The 3 months correlation between WILLIS and CDL is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and CDL INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDL INVESTMENT 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 CDL INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDL INVESTMENT has no effect on the direction of WILLIS LEASE i.e., WILLIS LEASE and CDL INVESTMENT go up and down completely randomly.

Pair Corralation between WILLIS LEASE and CDL INVESTMENT

Assuming the 90 days horizon WILLIS LEASE FIN is expected to under-perform the CDL INVESTMENT. In addition to that, WILLIS LEASE is 1.78 times more volatile than CDL INVESTMENT. It trades about -0.05 of its total potential returns per unit of risk. CDL INVESTMENT is currently generating about -0.03 per unit of volatility. If you would invest  43.00  in CDL INVESTMENT on December 28, 2024 and sell it today you would lose (2.00) from holding CDL INVESTMENT or give up 4.65% of portfolio value over 90 days.

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

WILLIS LEASE FIN  vs.  CDL INVESTMENT

WILLIS LEASE FIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days WILLIS LEASE FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CDL INVESTMENT

Risk-Adjusted Performance

Very Weak

Over the last 90 days CDL INVESTMENT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CDL INVESTMENT is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WILLIS LEASE and CDL INVESTMENT

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

The idea behind WILLIS LEASE FIN and CDL INVESTMENT 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.