Correlation Between American Airlines and RETAIL FOOD
Can any of the company-specific risk be diversified away by investing in both American Airlines and RETAIL FOOD 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 American Airlines and RETAIL FOOD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and RETAIL FOOD GROUP, you can compare the effects of market volatilities on American Airlines and RETAIL FOOD 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 American Airlines with a short position of RETAIL FOOD. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and RETAIL FOOD.
Diversification Opportunities for American Airlines and RETAIL FOOD
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and RETAIL is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and RETAIL FOOD GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RETAIL FOOD GROUP and American Airlines 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 American Airlines Group are associated (or correlated) with RETAIL FOOD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RETAIL FOOD GROUP has no effect on the direction of American Airlines i.e., American Airlines and RETAIL FOOD go up and down completely randomly.
Pair Corralation between American Airlines and RETAIL FOOD
Assuming the 90 days horizon American Airlines Group is expected to generate 2.13 times more return on investment than RETAIL FOOD. However, American Airlines is 2.13 times more volatile than RETAIL FOOD GROUP. It trades about 0.23 of its potential returns per unit of risk. RETAIL FOOD GROUP is currently generating about 0.01 per unit of risk. If you would invest 980.00 in American Airlines Group on September 23, 2024 and sell it today you would earn a total of 650.00 from holding American Airlines Group or generate 66.33% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.48% |
Values | Daily Returns |
American Airlines Group vs. RETAIL FOOD GROUP
Performance |
Timeline |
American Airlines |
RETAIL FOOD GROUP |
American Airlines and RETAIL FOOD Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Airlines and RETAIL FOOD
The main advantage of trading using opposite American Airlines and RETAIL FOOD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, RETAIL FOOD 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 RETAIL FOOD will offset losses from the drop in RETAIL FOOD's long position.American Airlines vs. Delta Air Lines | American Airlines vs. Air China Limited | American Airlines vs. AIR CHINA LTD | American Airlines vs. RYANAIR HLDGS ADR |
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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