Correlation Between AerCap Holdings and BAIYU Holdings

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

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

Diversification Opportunities for AerCap Holdings and BAIYU Holdings

-0.58

Correlation Coefficient

AerCap Holdings  BAIYU Holdings

Excellent diversification

The 3 months correlation between AerCap and BAIYU is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding AerCap Holdings NV and BAIYU Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAIYU Holdings and AerCap Holdings 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 AerCap Holdings NV are associated (or correlated) with BAIYU Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAIYU Holdings has no effect on the direction of AerCap Holdings i.e., AerCap Holdings and BAIYU Holdings go up and down completely randomly.

Pair Corralation between AerCap Holdings and BAIYU Holdings

Considering the 90-day investment horizon AerCap Holdings NV is expected to generate 0.17 times more return on investment than BAIYU Holdings. However, AerCap Holdings NV is 5.75 times less risky than BAIYU Holdings. It trades about 0.24 of its potential returns per unit of risk. BAIYU Holdings is currently generating about -0.06 per unit of risk. If you would invest  5,929  in AerCap Holdings NV on February 23, 2024 and sell it today you would earn a total of  3,209  from holding AerCap Holdings NV or generate 54.12% return on investment over 90 days.

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

AerCap Holdings NV  vs.  BAIYU Holdings

AerCap Holdings NV

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, AerCap Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

BAIYU Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAIYU Holdings 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 basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AerCap Holdings and BAIYU Holdings

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

The idea behind AerCap Holdings NV and BAIYU Holdings 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.