Correlation Between AerCap Holdings and Alta Equipment

Can any of the company-specific risk be diversified away by investing in both AerCap Holdings and Alta Equipment 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 Alta Equipment 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 Alta Equipment Group, you can compare the effects of market volatilities on AerCap Holdings and Alta Equipment 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 Alta Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of AerCap Holdings and Alta Equipment.

Diversification Opportunities for AerCap Holdings and Alta Equipment

0.66

Correlation Coefficient

AerCap Holdings  Alta Equipment

Poor diversification

The 3 months correlation between AerCap and Alta is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding AerCap Holdings NV and Alta Equipment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alta Equipment Group 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 Alta Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alta Equipment Group has no effect on the direction of AerCap Holdings i.e., AerCap Holdings and Alta Equipment go up and down completely randomly.

Pair Corralation between AerCap Holdings and Alta Equipment

Considering the 90-day investment horizon AerCap Holdings NV is expected to generate 0.68 times more return on investment than Alta Equipment. However, AerCap Holdings NV is 1.46 times less risky than Alta Equipment. It trades about 0.07 of its potential returns per unit of risk. Alta Equipment Group is currently generating about 0.02 per unit of risk. If you would invest  4,858  in AerCap Holdings NV on January 24, 2024 and sell it today you would earn a total of  3,583  from holding AerCap Holdings NV or generate 73.75% return on investment over 90 days.

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

AerCap Holdings NV  vs.  Alta Equipment Group

AerCap Holdings NV

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, AerCap Holdings may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Alta Equipment Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alta Equipment may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with AerCap Holdings and Alta Equipment

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

The idea behind AerCap Holdings NV and Alta Equipment Group 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.