Correlation Between AerSale Corp and Noranda Aluminum

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

By analyzing existing cross correlation between AerSale Corp and Noranda Aluminum Holding, you can compare the effects of market volatilities on AerSale Corp and Noranda Aluminum 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 Noranda Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of AerSale Corp and Noranda Aluminum.

Diversification Opportunities for AerSale Corp and Noranda Aluminum

0.84

Correlation Coefficient

AerSale Corp  Noranda Aluminum

Very poor diversification

The 3 months correlation between AerSale and Noranda is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding AerSale Corp and Noranda Aluminum Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noranda Aluminum Holding 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 Noranda Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noranda Aluminum Holding has no effect on the direction of AerSale Corp i.e., AerSale Corp and Noranda Aluminum go up and down completely randomly.

Pair Corralation between AerSale Corp and Noranda Aluminum

If you would invest (100.00) in Noranda Aluminum Holding on January 30, 2024 and sell it today you would earn a total of  100.00  from holding Noranda Aluminum Holding or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	0.0%
Values	Daily Returns

AerSale Corp  vs.  Noranda Aluminum Holding

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 weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Noranda Aluminum Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noranda Aluminum Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Noranda Aluminum is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with AerSale Corp and Noranda Aluminum

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

The idea behind AerSale Corp and Noranda Aluminum Holding 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.