Correlation Between Barnes and Air Lease

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

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

Diversification Opportunities for Barnes and Air Lease

0.49

Correlation Coefficient

Barnes  Air Lease

Very weak diversification

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

Pair Corralation between Barnes and Air Lease

Taking into account the 90-day investment horizon Barnes is expected to generate 1.17 times less return on investment than Air Lease. In addition to that, Barnes is 1.35 times more volatile than Air Lease. It trades about 0.03 of its total potential returns per unit of risk. Air Lease is currently generating about 0.04 per unit of volatility. If you would invest  3,756  in Air Lease on September 4, 2024 and sell it today you would earn a total of  1,287  from holding Air Lease or generate 34.27% return on investment over 90 days.

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

Barnes Group  vs.  Air Lease

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.

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.

Pair Trading with Barnes and Air Lease

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

The idea behind Barnes Group and Air Lease 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.