Correlation Between Air Lease and Turning Point

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

By analyzing existing cross correlation between Air Lease and Turning Point Brands, you can compare the effects of market volatilities on Air Lease and Turning Point 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 Turning Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and Turning Point.

Diversification Opportunities for Air Lease and Turning Point

0.93

Correlation Coefficient

Air Lease  Turning Point

Almost no diversification

The 3 months correlation between Air and Turning is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Turning Point Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Turning Point Brands 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 Turning Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Turning Point Brands has no effect on the direction of Air Lease i.e., Air Lease and Turning Point go up and down completely randomly.

Pair Corralation between Air Lease and Turning Point

Allowing for the 90-day total investment horizon Air Lease is expected to generate 5.95 times less return on investment than Turning Point. But when comparing it to its historical volatility, Air Lease is 1.34 times less risky than Turning Point. It trades about 0.06 of its potential returns per unit of risk. Turning Point Brands is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  4,208  in Turning Point Brands on September 22, 2024 and sell it today you would earn a total of  1,706  from holding Turning Point Brands or generate 40.54% return on investment over 90 days.

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

Air Lease  vs.  Turning Point Brands

Air Lease

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Air Lease is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Turning Point Brands

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Turning Point Brands are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Turning Point sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Lease and Turning Point

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

The idea behind Air Lease and Turning Point Brands 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.