Correlation Between Stagwell and China Aircraft

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

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

Diversification Opportunities for Stagwell and China Aircraft

-0.13

Correlation Coefficient

Stagwell  China Aircraft

Good diversification

The 3 months correlation between Stagwell and China is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Stagwell and China Aircraft Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Aircraft Leasing and Stagwell 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 Stagwell are associated (or correlated) with China Aircraft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Aircraft Leasing has no effect on the direction of Stagwell i.e., Stagwell and China Aircraft go up and down completely randomly.

Pair Corralation between Stagwell and China Aircraft

Given the investment horizon of 90 days Stagwell is expected to generate 12.94 times less return on investment than China Aircraft. But when comparing it to its historical volatility, Stagwell is 1.47 times less risky than China Aircraft. It trades about 0.01 of its potential returns per unit of risk. China Aircraft Leasing is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  30.00  in China Aircraft Leasing on September 29, 2024 and sell it today you would earn a total of  10.00  from holding China Aircraft Leasing or generate 33.33% return on investment over 90 days.

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

Stagwell  vs.  China Aircraft Leasing

Stagwell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stagwell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Stagwell is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

China Aircraft Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Aircraft Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Stagwell and China Aircraft

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

The idea behind Stagwell and China Aircraft Leasing 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.