Correlation Between Cars and AerSale Corp

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

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

Diversification Opportunities for Cars and AerSale Corp

0.82

Correlation Coefficient

Cars  AerSale Corp

Very poor diversification

The 3 months correlation between Cars and AerSale is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and AerSale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerSale Corp and Cars 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 Cars Inc are associated (or correlated) with AerSale Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerSale Corp has no effect on the direction of Cars i.e., Cars and AerSale Corp go up and down completely randomly.

Pair Corralation between Cars and AerSale Corp

Given the investment horizon of 90 days Cars Inc is expected to generate 0.65 times more return on investment than AerSale Corp. However, Cars Inc is 1.54 times less risky than AerSale Corp. It trades about 0.0 of its potential returns per unit of risk. AerSale Corp is currently generating about -0.07 per unit of risk. If you would invest  1,897  in Cars Inc on September 24, 2024 and sell it today you would lose (151.00) from holding Cars Inc or give up 7.96% of portfolio value over 90 days.

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

Cars Inc  vs.  AerSale Corp

Cars Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cars is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

AerSale Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AerSale Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, AerSale Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cars and AerSale Corp

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

The idea behind Cars Inc and AerSale Corp 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.