Correlation Between REDSUN PROPERTIES and American Airlines

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

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

Diversification Opportunities for REDSUN PROPERTIES and American Airlines

-0.55

Correlation Coefficient

REDSUN PROPERTIES  American Airlines

Excellent diversification

The 3 months correlation between REDSUN and American is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding REDSUN PROPERTIES GROUP and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and REDSUN PROPERTIES 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 REDSUN PROPERTIES GROUP 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 REDSUN PROPERTIES i.e., REDSUN PROPERTIES and American Airlines go up and down completely randomly.

Pair Corralation between REDSUN PROPERTIES and American Airlines

Assuming the 90 days horizon REDSUN PROPERTIES GROUP is expected to generate 11.85 times more return on investment than American Airlines. However, REDSUN PROPERTIES is 11.85 times more volatile than American Airlines Group. It trades about 0.11 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.05 per unit of risk. If you would invest  1.00  in REDSUN PROPERTIES GROUP on October 2, 2024 and sell it today you would lose (0.70) from holding REDSUN PROPERTIES GROUP or give up 70.0% of portfolio value over 90 days.

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

REDSUN PROPERTIES GROUP  vs.  American Airlines Group

REDSUN PROPERTIES

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in REDSUN PROPERTIES GROUP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, REDSUN PROPERTIES reported solid returns over the last few months and may actually be approaching a breakup point.

American Airlines

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 20 (%) 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.

Pair Trading with REDSUN PROPERTIES and American Airlines

The main advantage of trading using opposite REDSUN PROPERTIES and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REDSUN PROPERTIES 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 REDSUN PROPERTIES GROUP 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.