Correlation Between Air Lease and Barnes

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

By analyzing existing cross correlation between Air Lease and Barnes Group, you can compare the effects of market volatilities on Air Lease and Barnes 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 Air Lease with a short position of Barnes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and Barnes.

Diversification Opportunities for Air Lease and Barnes

0.49

Correlation Coefficient

Air Lease  Barnes

Very weak diversification

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

Pair Corralation between Air Lease and Barnes

Allowing for the 90-day total investment horizon Air Lease is expected to generate 1.84 times less return on investment than Barnes. But when comparing it to its historical volatility, Air Lease is 1.08 times less risky than Barnes. It trades about 0.06 of its potential returns per unit of risk. Barnes Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,831  in Barnes Group on September 4, 2024 and sell it today you would earn a total of  1,875  from holding Barnes Group or generate 66.23% return on investment over 90 days.

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

Air Lease  vs.  Barnes Group

Air Lease

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Air Lease disclosed solid returns over the last few months and may actually be approaching a breakup point.

Barnes Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Barnes sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Lease and Barnes

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

The idea behind Air Lease and Barnes Group 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.