Correlation Between KIMBALL ELECTRONICS and American Airlines

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

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

Diversification Opportunities for KIMBALL ELECTRONICS and American Airlines

0.33

Correlation Coefficient

KIMBALL ELECTRONICS  American Airlines

Weak diversification

The 3 months correlation between KIMBALL and American is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding KIMBALL ELECTRONICS and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS i.e., KIMBALL ELECTRONICS and American Airlines go up and down completely randomly.

Pair Corralation between KIMBALL ELECTRONICS and American Airlines

Assuming the 90 days horizon KIMBALL ELECTRONICS is expected to generate 2.63 times less return on investment than American Airlines. But when comparing it to its historical volatility, KIMBALL ELECTRONICS is 2.27 times less risky than American Airlines. It trades about 0.01 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,639  in American Airlines Group on October 26, 2024 and sell it today you would lose (6.00) from holding American Airlines Group or give up 0.37% of portfolio value over 90 days.

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

KIMBALL ELECTRONICS  vs.  American Airlines Group

KIMBALL ELECTRONICS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KIMBALL ELECTRONICS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KIMBALL ELECTRONICS reported solid returns over the last few months and may actually be approaching a breakup point.

American Airlines

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 10 (%) 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 KIMBALL ELECTRONICS and American Airlines

The main advantage of trading using opposite KIMBALL ELECTRONICS and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.