Correlation Between Formula Systems and Air Lease
Can any of the company-specific risk be diversified away by investing in both Formula Systems 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 Formula Systems and Air Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formula Systems 1985 and Air Lease, you can compare the effects of market volatilities on Formula Systems 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 Formula Systems with a short position of Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formula Systems and Air Lease.
Diversification Opportunities for Formula Systems and Air Lease
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Formula and Air is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Formula Systems 1985 and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Formula Systems 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 Formula Systems 1985 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 Formula Systems i.e., Formula Systems and Air Lease go up and down completely randomly.
Pair Corralation between Formula Systems and Air Lease
Assuming the 90 days horizon Formula Systems 1985 is expected to under-perform the Air Lease. In addition to that, Formula Systems is 1.71 times more volatile than Air Lease. It trades about -0.21 of its total potential returns per unit of risk. Air Lease is currently generating about 0.15 per unit of volatility. If you would invest 4,910 in Air Lease on January 25, 2024 and sell it today you would earn a total of 191.00 from holding Air Lease or generate 3.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Formula Systems 1985 vs. Air Lease
Performance |
| Timeline |
| Formula Systems 1985 |
| Air Lease |
Formula Systems and Air Lease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formula Systems and Air Lease
The main advantage of trading using opposite Formula Systems and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formula Systems 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.| Formula Systems vs. FiscalNote Holdings | Formula Systems vs. Innodata | Formula Systems vs. Aurora Innovation | Formula Systems vs. Conduent |
| Air Lease vs. The Aarons | Air Lease vs. McGrath RentCorp | Air Lease vs. PROG Holdings | Air Lease vs. Ryder System |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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