Correlation Between WILLIS LEASE and Rock Tech

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

Diversification Opportunities for WILLIS LEASE and Rock Tech

-0.5

Correlation Coefficient

WILLIS LEASE  Rock Tech

Very good diversification

The 3 months correlation between WILLIS and Rock is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium 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 Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of WILLIS LEASE i.e., WILLIS LEASE and Rock Tech go up and down completely randomly.

Pair Corralation between WILLIS LEASE and Rock Tech

Assuming the 90 days horizon WILLIS LEASE is expected to generate 7.55 times less return on investment than Rock Tech. But when comparing it to its historical volatility, WILLIS LEASE FIN is 1.96 times less risky than Rock Tech. It trades about 0.01 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  68.00  in Rock Tech Lithium on September 25, 2024 and sell it today you would earn a total of  1.00  from holding Rock Tech Lithium or generate 1.47% 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.  Rock Tech Lithium

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 weak basic indicators, WILLIS LEASE reported solid returns over the last few months and may actually be approaching a breakup point.

Rock Tech Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rock Tech Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Rock Tech 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 Rock Tech

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

The idea behind WILLIS LEASE FIN and Rock Tech Lithium 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.