Correlation Between FTAI Aviation and Timken

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

By analyzing existing cross correlation between FTAI Aviation Ltd and Timken Company, you can compare the effects of market volatilities on FTAI Aviation and Timken 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 FTAI Aviation with a short position of Timken. Check out your portfolio center. Please also check ongoing floating volatility patterns of FTAI Aviation and Timken.

Diversification Opportunities for FTAI Aviation and Timken

-0.61

Correlation Coefficient

FTAI Aviation  Timken

Excellent diversification

The 3 months correlation between FTAI and Timken is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding FTAI Aviation Ltd and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company and FTAI Aviation 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 FTAI Aviation Ltd are associated (or correlated) with Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of FTAI Aviation i.e., FTAI Aviation and Timken go up and down completely randomly.

Pair Corralation between FTAI Aviation and Timken

Assuming the 90 days horizon FTAI Aviation Ltd is expected to generate 0.41 times more return on investment than Timken. However, FTAI Aviation Ltd is 2.41 times less risky than Timken. It trades about 0.06 of its potential returns per unit of risk. Timken Company is currently generating about -0.1 per unit of risk. If you would invest  2,559  in FTAI Aviation Ltd on September 27, 2024 and sell it today you would earn a total of  91.00  from holding FTAI Aviation Ltd or generate 3.56% return on investment over 90 days.

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

FTAI Aviation Ltd  vs.  Timken Company

FTAI Aviation

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FTAI Aviation Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, FTAI Aviation is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with FTAI Aviation and Timken

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

The idea behind FTAI Aviation Ltd and Timken Company 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.