Correlation Between Willis Lease and Shenzhen Investment

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

Diversification Opportunities for Willis Lease and Shenzhen Investment

0.59

Correlation Coefficient

Willis Lease  Shenzhen Investment

Very weak diversification

The 3 months correlation between Willis and Shenzhen is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Willis Lease Finance and Shenzhen Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen 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 Finance are associated (or correlated) with Shenzhen Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Investment has no effect on the direction of Willis Lease i.e., Willis Lease and Shenzhen Investment go up and down completely randomly.

Pair Corralation between Willis Lease and Shenzhen Investment

Given the investment horizon of 90 days Willis Lease Finance is expected to generate 6.9 times more return on investment than Shenzhen Investment. However, Willis Lease is 6.9 times more volatile than Shenzhen Investment Holdings. It trades about 0.05 of its potential returns per unit of risk. Shenzhen Investment Holdings is currently generating about 0.13 per unit of risk. If you would invest  18,154  in Willis Lease Finance on October 26, 2024 and sell it today you would earn a total of  1,496  from holding Willis Lease Finance or generate 8.24% return on investment over 90 days.

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

Willis Lease Finance  vs.  Shenzhen Investment Holdings

Willis Lease Finance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Lease Finance are ranked lower than 4 (%) 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.

Shenzhen Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Investment Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Shenzhen Investment 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 Shenzhen Investment

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

The idea behind Willis Lease Finance and Shenzhen Investment Holdings 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.