Correlation Between Metalrgica Riosulense and American Airlines

Can any of the company-specific risk be diversified away by investing in both Metalrgica Riosulense and American Airlines 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 Metalrgica Riosulense and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Metalrgica Riosulense SA and American Airlines Group, you can compare the effects of market volatilities on Metalrgica Riosulense and American Airlines 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 Metalrgica Riosulense with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metalrgica Riosulense and American Airlines.

Diversification Opportunities for Metalrgica Riosulense and American Airlines

-0.88

Correlation Coefficient

Metalrgica Riosulense  American Airlines

Pay attention - limited upside

The 3 months correlation between Metalrgica and American is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Metalrgica Riosulense SA and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Metalrgica Riosulense 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 Metalrgica Riosulense SA are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Metalrgica Riosulense i.e., Metalrgica Riosulense and American Airlines go up and down completely randomly.

Pair Corralation between Metalrgica Riosulense and American Airlines

Assuming the 90 days trading horizon Metalrgica Riosulense SA is expected to under-perform the American Airlines. But the preferred stock apears to be less risky and, when comparing its historical volatility, Metalrgica Riosulense SA is 2.29 times less risky than American Airlines. The preferred stock trades about -0.18 of its potential returns per unit of risk. The American Airlines Group is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  6,096  in American Airlines Group on September 17, 2024 and sell it today you would earn a total of  4,064  from holding American Airlines Group or generate 66.67% return on investment over 90 days.

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

Metalrgica Riosulense SA  vs.  American Airlines Group

Metalrgica Riosulense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metalrgica Riosulense SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

American Airlines

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, American Airlines sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metalrgica Riosulense and American Airlines

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

The idea behind Metalrgica Riosulense SA and American Airlines Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.