Correlation Between Air Lease and ARISTOCRAT LEISURE

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

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

Diversification Opportunities for Air Lease and ARISTOCRAT LEISURE

0.93

Correlation Coefficient

Air Lease  ARISTOCRAT LEISURE

Almost no diversification

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

Pair Corralation between Air Lease and ARISTOCRAT LEISURE

Assuming the 90 days trading horizon Air Lease is expected to generate 1.91 times more return on investment than ARISTOCRAT LEISURE. However, Air Lease is 1.91 times more volatile than ARISTOCRAT LEISURE. It trades about 0.39 of its potential returns per unit of risk. ARISTOCRAT LEISURE is currently generating about 0.56 per unit of risk. If you would invest  4,060  in Air Lease on September 5, 2024 and sell it today you would earn a total of  740.00  from holding Air Lease or generate 18.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Air Lease  vs.  ARISTOCRAT LEISURE

Air Lease

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Air Lease reported solid returns over the last few months and may actually be approaching a breakup point.

ARISTOCRAT LEISURE

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Lease and ARISTOCRAT LEISURE

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

The idea behind Air Lease and ARISTOCRAT LEISURE 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.