Correlation Between American Airlines and LEEF BRANDS

Can any of the company-specific risk be diversified away by investing in both American Airlines and LEEF BRANDS 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 LEEF BRANDS 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 LEEF BRANDS INC, you can compare the effects of market volatilities on American Airlines and LEEF BRANDS 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 LEEF BRANDS. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and LEEF BRANDS.

Diversification Opportunities for American Airlines and LEEF BRANDS

0.52

Correlation Coefficient

American Airlines  LEEF BRANDS

Very weak diversification

The 3 months correlation between American and LEEF is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and LEEF BRANDS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEEF BRANDS INC 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 LEEF BRANDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEEF BRANDS INC has no effect on the direction of American Airlines i.e., American Airlines and LEEF BRANDS go up and down completely randomly.

Pair Corralation between American Airlines and LEEF BRANDS

Assuming the 90 days horizon American Airlines is expected to generate 22.3 times less return on investment than LEEF BRANDS. But when comparing it to its historical volatility, American Airlines Group is 27.33 times less risky than LEEF BRANDS. It trades about 0.24 of its potential returns per unit of risk. LEEF BRANDS INC is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  0.50  in LEEF BRANDS INC on September 17, 2024 and sell it today you would earn a total of  16.50  from holding LEEF BRANDS INC or generate 3300.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

American Airlines Group  vs.  LEEF BRANDS INC

American Airlines

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

LEEF BRANDS INC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LEEF BRANDS INC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LEEF BRANDS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Airlines and LEEF BRANDS

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

The idea behind American Airlines Group and LEEF BRANDS INC 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.