Correlation Between Air Lease and Toro

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

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

Diversification Opportunities for Air Lease and Toro

-0.8

Correlation Coefficient

Air Lease  Toro

Pay attention - limited upside

The 3 months correlation between Air and Toro is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro 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 Toro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro has no effect on the direction of Air Lease i.e., Air Lease and Toro go up and down completely randomly.

Pair Corralation between Air Lease and Toro

Allowing for the 90-day total investment horizon Air Lease is expected to generate 0.89 times more return on investment than Toro. However, Air Lease is 1.12 times less risky than Toro. It trades about 0.17 of its potential returns per unit of risk. Toro Co is currently generating about 0.02 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	Significant
Accuracy	99.19%
Values	Daily Returns

Air Lease  vs.  Toro Co

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.

Toro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toro Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Toro is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Air Lease and Toro

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

The idea behind Air Lease and Toro Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.