Correlation Between Lend Lease and Air Lease

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

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

Diversification Opportunities for Lend Lease and Air Lease

-0.53

Correlation Coefficient

Lend Lease  Air Lease

Excellent diversification

The 3 months correlation between Lend and Air is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lend Lease Group and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Lend 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 Lend Lease Group 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 Lend Lease i.e., Lend Lease and Air Lease go up and down completely randomly.

Pair Corralation between Lend Lease and Air Lease

Assuming the 90 days horizon Lend Lease Group is expected to under-perform the Air Lease. In addition to that, Lend Lease is 1.22 times more volatile than Air Lease. It trades about -0.04 of its total potential returns per unit of risk. Air Lease is currently generating about 0.05 per unit of volatility. If you would invest  3,153  in Air Lease on March 19, 2024 and sell it today you would earn a total of  1,319  from holding Air Lease or generate 41.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	73.19%
Values	Daily Returns

Lend Lease Group  vs.  Air Lease

Lend Lease Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lend Lease Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lend Lease is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Air Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Air Lease is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Lend Lease and Air Lease

The main advantage of trading using opposite Lend Lease and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lend Lease 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 Lend Lease Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.