Correlation Between Procter Gamble and Air Lease

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

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

Diversification Opportunities for Procter Gamble and Air Lease

0.3

Correlation Coefficient

Procter Gamble  Air Lease

Weak diversification

The 3 months correlation between Procter and Air is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Procter Gamble 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 Procter Gamble are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Procter Gamble i.e., Procter Gamble and Air Lease go up and down completely randomly.

Pair Corralation between Procter Gamble and Air Lease

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.42 times more return on investment than Air Lease. However, Procter Gamble is 2.37 times less risky than Air Lease. It trades about 0.52 of its potential returns per unit of risk. Air Lease is currently generating about 0.08 per unit of risk. If you would invest  15,504  in Procter Gamble on February 6, 2024 and sell it today you would earn a total of  942.00  from holding Procter Gamble or generate 6.08% return on investment over 90 days.

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

Procter Gamble  vs.  Air Lease

Procter Gamble

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Air Lease

Risk-Adjusted Performance

15 of 100

Solid

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

Pair Trading with Procter Gamble and Air Lease

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

The idea behind Procter Gamble and Air Lease 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.