Correlation Between American Airlines and Invion

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

Diversification Opportunities for American Airlines and Invion

0.3

Correlation Coefficient

American Airlines  Invion

Weak diversification

The 3 months correlation between American and Invion is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Invion Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invion Limited 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 Invion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invion Limited has no effect on the direction of American Airlines i.e., American Airlines and Invion go up and down completely randomly.

Pair Corralation between American Airlines and Invion

Assuming the 90 days horizon American Airlines is expected to generate 22.17 times less return on investment than Invion. But when comparing it to its historical volatility, American Airlines Group is 33.57 times less risky than Invion. It trades about 0.21 of its potential returns per unit of risk. Invion Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Invion Limited on October 8, 2024 and sell it today you would earn a total of  0.00  from holding Invion Limited or generate 0.0% return on investment over 90 days.

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

American Airlines Group  vs.  Invion Limited

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 nearly weak basic indicators, American Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Invion Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invion Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Invion reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Airlines and Invion

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

The idea behind American Airlines Group and Invion Limited 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..