Correlation Between MASSACHUSETTS and Air Lease

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

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

Diversification Opportunities for MASSACHUSETTS and Air Lease

-0.32

Correlation Coefficient

MASSACHUSETTS  Air Lease

Very good diversification

The 3 months correlation between MASSACHUSETTS and Air is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding MASSACHUSETTS INST TECHNOLOGY and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and MASSACHUSETTS 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 MASSACHUSETTS INST TECHNOLOGY 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 MASSACHUSETTS i.e., MASSACHUSETTS and Air Lease go up and down completely randomly.

Pair Corralation between MASSACHUSETTS and Air Lease

Assuming the 90 days trading horizon MASSACHUSETTS INST TECHNOLOGY is expected to generate 1.5 times more return on investment than Air Lease. However, MASSACHUSETTS is 1.5 times more volatile than Air Lease. It trades about 0.1 of its potential returns per unit of risk. Air Lease is currently generating about -0.01 per unit of risk. If you would invest  10,594  in MASSACHUSETTS INST TECHNOLOGY on September 21, 2024 and sell it today you would earn a total of  497.00  from holding MASSACHUSETTS INST TECHNOLOGY or generate 4.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

MASSACHUSETTS INST TECHNOLOGY  vs.  Air Lease

MASSACHUSETTS INST

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MASSACHUSETTS INST TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MASSACHUSETTS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Air Lease

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Air Lease is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with MASSACHUSETTS and Air Lease

The main advantage of trading using opposite MASSACHUSETTS and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MASSACHUSETTS 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 MASSACHUSETTS INST TECHNOLOGY 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.