Correlation Between Global Ship and Air Lease

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

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

Diversification Opportunities for Global Ship and Air Lease

0.02

Correlation Coefficient

Global Ship  Air Lease

Significant diversification

The 3 months correlation between Global and Air is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Global Ship 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 Global Ship Lease 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 Global Ship i.e., Global Ship and Air Lease go up and down completely randomly.

Pair Corralation between Global Ship and Air Lease

Assuming the 90 days trading horizon Global Ship is expected to generate 4.93 times less return on investment than Air Lease. But when comparing it to its historical volatility, Global Ship Lease is 2.47 times less risky than Air Lease. It trades about 0.08 of its potential returns per unit of risk. Air Lease is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,366  in Air Lease on August 31, 2024 and sell it today you would earn a total of  705.00  from holding Air Lease or generate 16.15% return on investment over 90 days.

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

Global Ship Lease  vs.  Air Lease

Global Ship Lease

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Ship Lease are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Global Ship is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Air Lease

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Air Lease disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Ship and Air Lease

The main advantage of trading using opposite Global Ship and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship 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 Global Ship Lease 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.