Correlation Between Aarons and FTAI Aviation

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

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

Diversification Opportunities for Aarons and FTAI Aviation

0.75

Correlation Coefficient

Aarons  FTAI Aviation

Poor diversification

The 3 months correlation between Aarons and FTAI is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding The Aarons and FTAI Aviation Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Aviation 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 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 Aarons i.e., Aarons and FTAI Aviation go up and down completely randomly.

Pair Corralation between Aarons and FTAI Aviation

Considering the 90-day investment horizon Aarons is expected to generate 1.46 times less return on investment than FTAI Aviation. But when comparing it to its historical volatility, The Aarons is 1.96 times less risky than FTAI Aviation. It trades about 0.26 of its potential returns per unit of risk. FTAI Aviation Ltd is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,506  in FTAI Aviation Ltd on September 4, 2024 and sell it today you would earn a total of  254.00  from holding FTAI Aviation Ltd or generate 10.14% return on investment over 90 days.

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

The Aarons  vs.  FTAI Aviation Ltd

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.

FTAI Aviation

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FTAI Aviation Ltd are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal forward indicators, FTAI Aviation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aarons and FTAI Aviation

The main advantage of trading using opposite Aarons and FTAI Aviation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aarons 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 The Aarons 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.