Correlation Between WILLIS LEASE and FUYO GENERAL

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

Diversification Opportunities for WILLIS LEASE and FUYO GENERAL

-0.51

Correlation Coefficient

WILLIS LEASE  FUYO GENERAL

Excellent diversification

The 3 months correlation between WILLIS and FUYO is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and FUYO GENERAL LEASE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUYO GENERAL LEASE 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 FUYO GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUYO GENERAL LEASE has no effect on the direction of WILLIS LEASE i.e., WILLIS LEASE and FUYO GENERAL go up and down completely randomly.

Pair Corralation between WILLIS LEASE and FUYO GENERAL

Assuming the 90 days horizon WILLIS LEASE FIN is expected to generate 3.43 times more return on investment than FUYO GENERAL. However, WILLIS LEASE is 3.43 times more volatile than FUYO GENERAL LEASE. It trades about 0.28 of its potential returns per unit of risk. FUYO GENERAL LEASE is currently generating about 0.0 per unit of risk. If you would invest  9,738  in WILLIS LEASE FIN on August 31, 2024 and sell it today you would earn a total of  11,062  from holding WILLIS LEASE FIN or generate 113.6% return on investment over 90 days.

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

WILLIS LEASE FIN  vs.  FUYO GENERAL LEASE

WILLIS LEASE FIN

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 22 (%) 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.

FUYO GENERAL LEASE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FUYO GENERAL LEASE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FUYO GENERAL 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 FUYO GENERAL

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

The idea behind WILLIS LEASE FIN and FUYO GENERAL 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.