Correlation Between Willis Lease and PROG Holdings

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

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

Diversification Opportunities for Willis Lease and PROG Holdings

0.25

Correlation Coefficient

Willis Lease  PROG Holdings

Modest diversification

The 3 months correlation between Willis and PROG is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Willis Lease Finance and PROG Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PROG Holdings and Willis 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 Willis Lease Finance are associated (or correlated) with PROG Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PROG Holdings has no effect on the direction of Willis Lease i.e., Willis Lease and PROG Holdings go up and down completely randomly.

Pair Corralation between Willis Lease and PROG Holdings

Given the investment horizon of 90 days Willis Lease Finance is expected to generate 1.75 times more return on investment than PROG Holdings. However, Willis Lease is 1.75 times more volatile than PROG Holdings. It trades about 0.29 of its potential returns per unit of risk. PROG Holdings is currently generating about 0.08 per unit of risk. If you would invest  9,711  in Willis Lease Finance on August 15, 2024 and sell it today you would earn a total of  10,700  from holding Willis Lease Finance or generate 110.18% return on investment over 90 days.

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

Willis Lease Finance  vs.  PROG Holdings

Willis Lease Finance

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Lease Finance are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Willis Lease exhibited solid returns over the last few months and may actually be approaching a breakup point.

PROG Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PROG Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PROG Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Willis Lease and PROG Holdings

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

The idea behind Willis Lease Finance and PROG 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.