Correlation Between Willis Lease and FTAI Aviation

Can any of the company-specific risk be diversified away by investing in both Willis Lease and FTAI Aviation 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 FTAI Aviation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Willis Lease Finance and FTAI Aviation Ltd, you can compare the effects of market volatilities on Willis Lease and FTAI Aviation 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 FTAI Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willis Lease and FTAI Aviation.

Diversification Opportunities for Willis Lease and FTAI Aviation

0.86

Correlation Coefficient

Willis Lease  FTAI Aviation

Very poor diversification

The 3 months correlation between Willis and FTAI is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Willis Lease Finance and FTAI Aviation Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Aviation 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 Finance are associated (or correlated) with FTAI Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Aviation has no effect on the direction of Willis Lease i.e., Willis Lease and FTAI Aviation go up and down completely randomly.

Pair Corralation between Willis Lease and FTAI Aviation

Given the investment horizon of 90 days Willis Lease Finance is expected to generate 5.99 times more return on investment than FTAI Aviation. However, Willis Lease is 5.99 times more volatile than FTAI Aviation Ltd. It trades about 0.25 of its potential returns per unit of risk. FTAI Aviation Ltd is currently generating about 0.14 per unit of risk. If you would invest  6,608  in Willis Lease Finance on September 1, 2024 and sell it today you would earn a total of  15,199  from holding Willis Lease Finance or generate 230.01% return on investment over 90 days.

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

Willis Lease Finance  vs.  FTAI Aviation Ltd

Willis Lease Finance

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Lease Finance are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Willis Lease exhibited solid returns over the last few months and may actually be approaching a breakup point.

FTAI Aviation

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FTAI Aviation Ltd are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, FTAI Aviation may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Willis Lease and FTAI Aviation

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

The idea behind Willis Lease Finance and FTAI Aviation Ltd 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.