Correlation Between American Airlines and Qilian International

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

Diversification Opportunities for American Airlines and Qilian International

0.08

Correlation Coefficient

American Airlines  Qilian International

Significant diversification

The 3 months correlation between American and Qilian is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Qilian International Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qilian International 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 Qilian International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qilian International has no effect on the direction of American Airlines i.e., American Airlines and Qilian International go up and down completely randomly.

Pair Corralation between American Airlines and Qilian International

Considering the 90-day investment horizon American Airlines is expected to generate 1.27 times less return on investment than Qilian International. But when comparing it to its historical volatility, American Airlines Group is 2.19 times less risky than Qilian International. It trades about 0.2 of its potential returns per unit of risk. Qilian International Holding is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  670.00  in Qilian International Holding on September 5, 2024 and sell it today you would earn a total of  250.00  from holding Qilian International Holding or generate 37.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

American Airlines Group  vs.  Qilian International Holding

American Airlines

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, American Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

Qilian International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qilian International Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Qilian International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Airlines and Qilian International

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

The idea behind American Airlines Group and Qilian International Holding 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.