Correlation Between Air Lease and MI Homes

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

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

Diversification Opportunities for Air Lease and MI Homes

-0.09

Correlation Coefficient

Air Lease  MI Homes

Good diversification

The 3 months correlation between Air and MHO is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes 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 MI Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MI Homes has no effect on the direction of Air Lease i.e., Air Lease and MI Homes go up and down completely randomly.

Pair Corralation between Air Lease and MI Homes

Allowing for the 90-day total investment horizon Air Lease is expected to generate 0.65 times more return on investment than MI Homes. However, Air Lease is 1.54 times less risky than MI Homes. It trades about 0.17 of its potential returns per unit of risk. MI Homes is currently generating about 0.08 per unit of risk. If you would invest  3,647  in Air Lease on February 1, 2024 and sell it today you would earn a total of  1,377  from holding Air Lease or generate 37.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Air Lease  vs.  MI Homes

Air Lease

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Air Lease disclosed solid returns over the last few months and may actually be approaching a breakup point.

MI Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MI Homes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Air Lease and MI Homes

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

The idea behind Air Lease and MI Homes 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.