Correlation Between Air Lease and 3M

Can any of the company-specific risk be diversified away by investing in both Air Lease and 3M 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 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Air Lease and 3M Company, you can compare the effects of market volatilities on Air Lease and 3M 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 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and 3M.

Diversification Opportunities for Air Lease and 3M

0.51

Correlation Coefficient

Air Lease  3M

Very weak diversification

The 3 months correlation between Air and 3M is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company 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 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of Air Lease i.e., Air Lease and 3M go up and down completely randomly.

Pair Corralation between Air Lease and 3M

Allowing for the 90-day total investment horizon Air Lease is expected to generate 1.23 times more return on investment than 3M. However, Air Lease is 1.23 times more volatile than 3M Company. It trades about 0.09 of its potential returns per unit of risk. 3M Company is currently generating about -0.02 per unit of risk. If you would invest  4,577  in Air Lease on February 8, 2025 and sell it today you would earn a total of  785.00  from holding Air Lease or generate 17.15% return on investment over 90 days.

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

Air Lease  vs.  3M Company

Air Lease

Risk-Adjusted Performance

Modest

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 quite unfluctuating essential indicators, Air Lease disclosed solid returns over the last few months and may actually be approaching a breakup point.

3M Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days 3M Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, 3M is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Air Lease and 3M

The main advantage of trading using opposite Air Lease and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Lease position performs unexpectedly, 3M 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 3M will offset losses from the drop in 3M's long position.

The idea behind Air Lease and 3M Company 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.