Correlation Between American Airlines and Ryerson Holding

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

Diversification Opportunities for American Airlines and Ryerson Holding

-0.74

Correlation Coefficient

American Airlines  Ryerson Holding

Pay attention - limited upside

The 3 months correlation between American and Ryerson is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Ryerson Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ryerson Holding 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 Ryerson Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ryerson Holding has no effect on the direction of American Airlines i.e., American Airlines and Ryerson Holding go up and down completely randomly.

Pair Corralation between American Airlines and Ryerson Holding

Assuming the 90 days horizon American Airlines Group is expected to under-perform the Ryerson Holding. But the stock apears to be less risky and, when comparing its historical volatility, American Airlines Group is 1.55 times less risky than Ryerson Holding. The stock trades about -0.42 of its potential returns per unit of risk. The Ryerson Holding is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,140  in Ryerson Holding on December 4, 2024 and sell it today you would earn a total of  200.00  from holding Ryerson Holding or generate 9.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

American Airlines Group  vs.  Ryerson Holding

American Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Airlines Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, American Airlines is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Ryerson Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ryerson Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ryerson Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Airlines and Ryerson Holding

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

The idea behind American Airlines Group and Ryerson Holding 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.