Correlation Between American Airlines and Airbus SE

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

Diversification Opportunities for American Airlines and Airbus SE

-0.57

Correlation Coefficient

American Airlines  Airbus SE

Excellent diversification

The 3 months correlation between American and Airbus is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Airbus SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus SE 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 Airbus SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus SE has no effect on the direction of American Airlines i.e., American Airlines and Airbus SE go up and down completely randomly.

Pair Corralation between American Airlines and Airbus SE

Assuming the 90 days horizon American Airlines Group is expected to under-perform the Airbus SE. In addition to that, American Airlines is 1.47 times more volatile than Airbus SE. It trades about -0.25 of its total potential returns per unit of risk. Airbus SE is currently generating about 0.08 per unit of volatility. If you would invest  3,840  in Airbus SE on December 24, 2024 and sell it today you would earn a total of  320.00  from holding Airbus SE or generate 8.33% return on investment over 90 days.

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

American Airlines Group  vs.  Airbus SE

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Airbus SE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus SE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Airbus SE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with American Airlines and Airbus SE

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

The idea behind American Airlines Group and Airbus SE 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.