Correlation Between American Airlines and Sweetgreen

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

Diversification Opportunities for American Airlines and Sweetgreen

0.56

Correlation Coefficient

American Airlines  Sweetgreen

Very weak diversification

The 3 months correlation between American and Sweetgreen is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Sweetgreen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sweetgreen 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 Sweetgreen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sweetgreen has no effect on the direction of American Airlines i.e., American Airlines and Sweetgreen go up and down completely randomly.

Pair Corralation between American Airlines and Sweetgreen

Considering the 90-day investment horizon American Airlines is expected to generate 3.88 times less return on investment than Sweetgreen. But when comparing it to its historical volatility, American Airlines Group is 1.92 times less risky than Sweetgreen. It trades about 0.06 of its potential returns per unit of risk. Sweetgreen is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  990.00  in Sweetgreen on September 14, 2024 and sell it today you would earn a total of  2,456  from holding Sweetgreen or generate 248.08% return on investment over 90 days.

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

American Airlines Group  vs.  Sweetgreen

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 quite abnormal basic indicators, American Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sweetgreen

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sweetgreen are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Sweetgreen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with American Airlines and Sweetgreen

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

The idea behind American Airlines Group and Sweetgreen 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.