Correlation Between Penta Ocean and Air Lease

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

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

Diversification Opportunities for Penta Ocean and Air Lease

-0.33

Correlation Coefficient

Penta Ocean  Air Lease

Very good diversification

The 3 months correlation between Penta and Air is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Penta Ocean 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 Penta Ocean Construction Co 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 Penta Ocean i.e., Penta Ocean and Air Lease go up and down completely randomly.

Pair Corralation between Penta Ocean and Air Lease

Assuming the 90 days horizon Penta Ocean is expected to generate 5.73 times less return on investment than Air Lease. But when comparing it to its historical volatility, Penta Ocean Construction Co is 1.12 times less risky than Air Lease. It trades about 0.02 of its potential returns per unit of risk. Air Lease is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,041  in Air Lease on September 22, 2024 and sell it today you would earn a total of  519.00  from holding Air Lease or generate 12.84% return on investment over 90 days.

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

Penta Ocean Construction Co  vs.  Air Lease

Penta Ocean Construc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Penta Ocean is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Air Lease

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Penta Ocean and Air Lease

The main advantage of trading using opposite Penta Ocean and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penta Ocean 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 Penta Ocean Construction Co 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.