Correlation Between Air Lease and CAIRN HOMES

Can any of the company-specific risk be diversified away by investing in both Air Lease and CAIRN 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 CAIRN 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 CAIRN HOMES EO, you can compare the effects of market volatilities on Air Lease and CAIRN 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 CAIRN HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and CAIRN HOMES.

Diversification Opportunities for Air Lease and CAIRN HOMES

0.81

Correlation Coefficient

Air Lease  CAIRN HOMES

Very poor diversification

The 3 months correlation between Air and CAIRN is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and CAIRN HOMES EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAIRN HOMES EO 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 CAIRN HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAIRN HOMES EO has no effect on the direction of Air Lease i.e., Air Lease and CAIRN HOMES go up and down completely randomly.

Pair Corralation between Air Lease and CAIRN HOMES

Assuming the 90 days trading horizon Air Lease is expected to generate 0.82 times more return on investment than CAIRN HOMES. However, Air Lease is 1.22 times less risky than CAIRN HOMES. It trades about 0.19 of its potential returns per unit of risk. CAIRN HOMES EO is currently generating about 0.12 per unit of risk. If you would invest  3,985  in Air Lease on April 25, 2025 and sell it today you would earn a total of  875.00  from holding Air Lease or generate 21.96% return on investment over 90 days.

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

Air Lease  vs.  CAIRN HOMES EO

Air Lease

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Air Lease reported solid returns over the last few months and may actually be approaching a breakup point.

CAIRN HOMES EO

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CAIRN HOMES EO are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CAIRN HOMES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Lease and CAIRN HOMES

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

The idea behind Air Lease and CAIRN HOMES EO 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.