Correlation Between Aarons and AerCap Holdings

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

By analyzing existing cross correlation between The Aarons and AerCap Holdings NV, you can compare the effects of market volatilities on Aarons and AerCap Holdings 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 Aarons with a short position of AerCap Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aarons and AerCap Holdings.

Diversification Opportunities for Aarons and AerCap Holdings

0.49

Correlation Coefficient

Aarons  AerCap Holdings

Very weak diversification

The 3 months correlation between Aarons and AerCap is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding The Aarons and AerCap Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerCap Holdings NV and Aarons 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 The Aarons are associated (or correlated) with AerCap Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerCap Holdings NV has no effect on the direction of Aarons i.e., Aarons and AerCap Holdings go up and down completely randomly.

Pair Corralation between Aarons and AerCap Holdings

Considering the 90-day investment horizon The Aarons is expected to generate 0.31 times more return on investment than AerCap Holdings. However, The Aarons is 3.18 times less risky than AerCap Holdings. It trades about 0.26 of its potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.06 per unit of risk. If you would invest  985.00  in The Aarons on September 4, 2024 and sell it today you would earn a total of  24.00  from holding The Aarons or generate 2.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	35.94%
Values	Daily Returns

The Aarons  vs.  AerCap Holdings NV

Aarons

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days The Aarons has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very uncertain basic indicators, Aarons may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AerCap Holdings NV

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, AerCap Holdings is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Aarons and AerCap Holdings

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

The idea behind The Aarons and AerCap Holdings NV 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.