Correlation Between AerCap Holdings and Air Lease

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

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

Diversification Opportunities for AerCap Holdings and Air Lease

0.93

Correlation Coefficient

AerCap Holdings  Air Lease

Almost no diversification

The 3 months correlation between AerCap and Air is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding AerCap Holdings NV and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and AerCap Holdings 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 AerCap Holdings NV 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 AerCap Holdings i.e., AerCap Holdings and Air Lease go up and down completely randomly.

Pair Corralation between AerCap Holdings and Air Lease

Considering the 90-day investment horizon AerCap Holdings NV is expected to generate 0.9 times more return on investment than Air Lease. However, AerCap Holdings NV is 1.12 times less risky than Air Lease. It trades about 0.13 of its potential returns per unit of risk. Air Lease is currently generating about 0.07 per unit of risk. If you would invest  5,402  in AerCap Holdings NV on January 20, 2024 and sell it today you would earn a total of  2,972  from holding AerCap Holdings NV or generate 55.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

AerCap Holdings NV  vs.  Air Lease

AerCap Holdings NV

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, AerCap Holdings may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Air Lease

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Air Lease disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AerCap Holdings and Air Lease

The main advantage of trading using opposite AerCap Holdings and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AerCap Holdings 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 AerCap Holdings NV 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.