Correlation Between Timken and FTAI Aviation

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

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

Diversification Opportunities for Timken and FTAI Aviation

-0.61

Correlation Coefficient

Timken  FTAI Aviation

Excellent diversification

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

Pair Corralation between Timken and FTAI Aviation

Considering the 90-day investment horizon Timken Company is expected to under-perform the FTAI Aviation. In addition to that, Timken is 2.41 times more volatile than FTAI Aviation Ltd. It trades about -0.1 of its total potential returns per unit of risk. FTAI Aviation Ltd is currently generating about 0.06 per unit of volatility. 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

Timken Company  vs.  FTAI Aviation Ltd

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.

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.

Pair Trading with Timken and FTAI Aviation

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

The idea behind Timken Company and FTAI Aviation Ltd 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.