Correlation Between WILLIS LEASE and China Overseas

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

Diversification Opportunities for WILLIS LEASE and China Overseas

-0.61

Correlation Coefficient

WILLIS LEASE  China Overseas

Excellent diversification

The 3 months correlation between WILLIS and China is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land 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 China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of WILLIS LEASE i.e., WILLIS LEASE and China Overseas go up and down completely randomly.

Pair Corralation between WILLIS LEASE and China Overseas

Assuming the 90 days horizon WILLIS LEASE FIN is expected to generate 0.75 times more return on investment than China Overseas. However, WILLIS LEASE FIN is 1.33 times less risky than China Overseas. It trades about 0.1 of its potential returns per unit of risk. China Overseas Land is currently generating about 0.04 per unit of risk. If you would invest  5,192  in WILLIS LEASE FIN on October 23, 2024 and sell it today you would earn a total of  13,508  from holding WILLIS LEASE FIN or generate 260.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

WILLIS LEASE FIN  vs.  China Overseas Land

WILLIS LEASE FIN

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WILLIS LEASE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Overseas Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Overseas Land has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with WILLIS LEASE and China Overseas

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

The idea behind WILLIS LEASE FIN and China Overseas Land 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.