Correlation Between CAP LEASE and Porvair Plc

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

By analyzing existing cross correlation between CAP LEASE AVIATION and Porvair plc, you can compare the effects of market volatilities on CAP LEASE and Porvair Plc 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 CAP LEASE with a short position of Porvair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAP LEASE and Porvair Plc.

Diversification Opportunities for CAP LEASE and Porvair Plc

-0.04

Correlation Coefficient

CAP LEASE  Porvair Plc

Good diversification

The 3 months correlation between CAP and Porvair is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding CAP LEASE AVIATION and Porvair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porvair plc and CAP 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 CAP LEASE AVIATION are associated (or correlated) with Porvair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porvair plc has no effect on the direction of CAP LEASE i.e., CAP LEASE and Porvair Plc go up and down completely randomly.

Pair Corralation between CAP LEASE and Porvair Plc

Assuming the 90 days trading horizon CAP LEASE AVIATION is expected to under-perform the Porvair Plc. In addition to that, CAP LEASE is 1.45 times more volatile than Porvair plc. It trades about -0.16 of its total potential returns per unit of risk. Porvair plc is currently generating about 0.05 per unit of volatility. If you would invest  66,000  in Porvair plc on September 25, 2024 and sell it today you would earn a total of  3,000  from holding Porvair plc or generate 4.55% return on investment over 90 days.

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

CAP LEASE AVIATION  vs.  Porvair plc

CAP LEASE AVIATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAP LEASE AVIATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Porvair plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Porvair plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Porvair Plc is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CAP LEASE and Porvair Plc

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

The idea behind CAP LEASE AVIATION and Porvair plc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.