Correlation Between Air Lease and Air France-KLM

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

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

Diversification Opportunities for Air Lease and Air France-KLM

-0.86

Correlation Coefficient

Air Lease  Air France-KLM

Pay attention - limited upside

The 3 months correlation between Air and Air is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Air France KLM SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM and Air Lease 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 Air Lease are associated (or correlated) with Air France-KLM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Air Lease i.e., Air Lease and Air France-KLM go up and down completely randomly.

Pair Corralation between Air Lease and Air France-KLM

Assuming the 90 days horizon Air Lease is expected to under-perform the Air France-KLM. But the preferred stock apears to be less risky and, when comparing its historical volatility, Air Lease is 1.5 times less risky than Air France-KLM. The preferred stock trades about -0.14 of its potential returns per unit of risk. The Air France KLM SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,055  in Air France KLM SA on January 25, 2024 and sell it today you would earn a total of  25.00  from holding Air France KLM SA or generate 2.37% return on investment over 90 days.

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

Air Lease  vs.  Air France KLM SA

Air Lease

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Air Lease is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Air France KLM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air France KLM SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Air Lease and Air France-KLM

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

The idea behind Air Lease and Air France KLM SA 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.