Correlation Between Air Lease and XAAR PLC

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

By analyzing existing cross correlation between Air Lease and XAAR PLC LS 10, you can compare the effects of market volatilities on Air Lease and XAAR PLC 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 XAAR PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and XAAR PLC.

Diversification Opportunities for Air Lease and XAAR PLC

0.6

Correlation Coefficient

Air Lease  XAAR PLC

Poor diversification

The 3 months correlation between Air and XAAR is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and XAAR PLC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAAR PLC LS 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 XAAR PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAAR PLC LS has no effect on the direction of Air Lease i.e., Air Lease and XAAR PLC go up and down completely randomly.

Pair Corralation between Air Lease and XAAR PLC

Assuming the 90 days trading horizon Air Lease is expected to generate 0.6 times more return on investment than XAAR PLC. However, Air Lease is 1.66 times less risky than XAAR PLC. It trades about 0.19 of its potential returns per unit of risk. XAAR PLC LS 10 is currently generating about 0.11 per unit of risk. If you would invest  3,965  in Air Lease on April 24, 2025 and sell it today you would earn a total of  875.00  from holding Air Lease or generate 22.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Air Lease  vs.  XAAR PLC LS 10

Air Lease

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 15 (%) 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.

XAAR PLC LS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XAAR PLC LS 10 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, XAAR PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Lease and XAAR PLC

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

The idea behind Air Lease and XAAR PLC LS 10 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.