Correlation Between American Airlines and Kurita Water

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

Diversification Opportunities for American Airlines and Kurita Water

-0.55

Correlation Coefficient

American Airlines  Kurita Water

Excellent diversification

The 3 months correlation between American and Kurita is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Kurita Water Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kurita Water Industries 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 Kurita Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kurita Water Industries has no effect on the direction of American Airlines i.e., American Airlines and Kurita Water go up and down completely randomly.

Pair Corralation between American Airlines and Kurita Water

Assuming the 90 days horizon American Airlines Group is expected to generate 1.52 times more return on investment than Kurita Water. However, American Airlines is 1.52 times more volatile than Kurita Water Industries. It trades about 0.12 of its potential returns per unit of risk. Kurita Water Industries is currently generating about -0.06 per unit of risk. If you would invest  1,634  in American Airlines Group on October 11, 2024 and sell it today you would earn a total of  82.00  from holding American Airlines Group or generate 5.02% 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.  Kurita Water Industries

American Airlines

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, American Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Kurita Water Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kurita Water Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with American Airlines and Kurita Water

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

The idea behind American Airlines Group and Kurita Water Industries 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.