Correlation Between Air Lease and Sumitomo Mitsui

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

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

Diversification Opportunities for Air Lease and Sumitomo Mitsui

-0.53

Correlation Coefficient

Air Lease  Sumitomo Mitsui

Excellent diversification

The 3 months correlation between Air and Sumitomo is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Sumitomo Mitsui Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Cons 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Cons has no effect on the direction of Air Lease i.e., Air Lease and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Air Lease and Sumitomo Mitsui

Assuming the 90 days trading horizon Air Lease is expected to generate 1.1 times more return on investment than Sumitomo Mitsui. However, Air Lease is 1.1 times more volatile than Sumitomo Mitsui Construction. It trades about 0.19 of its potential returns per unit of risk. Sumitomo Mitsui Construction is currently generating about 0.05 per unit of risk. If you would invest  3,939  in Air Lease on September 3, 2024 and sell it today you would earn a total of  821.00  from holding Air Lease or generate 20.84% return on investment over 90 days.

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

Air Lease  vs.  Sumitomo Mitsui Construction

Air Lease

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Air Lease reported solid returns over the last few months and may actually be approaching a breakup point.

Sumitomo Mitsui Cons

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Construction are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sumitomo Mitsui is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Air Lease and Sumitomo Mitsui

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

The idea behind Air Lease and Sumitomo Mitsui Construction 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.