Correlation Between AerSale Corp and Landsea Homes

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

By analyzing existing cross correlation between AerSale Corp and Landsea Homes Corp, you can compare the effects of market volatilities on AerSale Corp and Landsea Homes 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 AerSale Corp with a short position of Landsea Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of AerSale Corp and Landsea Homes.

Diversification Opportunities for AerSale Corp and Landsea Homes

-0.02

Correlation Coefficient

AerSale Corp  Landsea Homes

Good diversification

The 3 months correlation between AerSale and Landsea is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding AerSale Corp and Landsea Homes Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Landsea Homes Corp and AerSale Corp 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 AerSale Corp are associated (or correlated) with Landsea Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Landsea Homes Corp has no effect on the direction of AerSale Corp i.e., AerSale Corp and Landsea Homes go up and down completely randomly.

Pair Corralation between AerSale Corp and Landsea Homes

Given the investment horizon of 90 days AerSale Corp is expected to under-perform the Landsea Homes. But the stock apears to be less risky and, when comparing its historical volatility, AerSale Corp is 1.15 times less risky than Landsea Homes. The stock trades about -0.31 of its potential returns per unit of risk. The Landsea Homes Corp is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  1,045  in Landsea Homes Corp on March 22, 2024 and sell it today you would lose (90.00) from holding Landsea Homes Corp or give up 8.61% of portfolio value over 90 days.

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

AerSale Corp  vs.  Landsea Homes Corp

AerSale Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AerSale Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Landsea Homes Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Landsea Homes Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with AerSale Corp and Landsea Homes

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

The idea behind AerSale Corp and Landsea Homes Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.