Correlation Between Ameriprise Financial and American Airlines

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

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

Diversification Opportunities for Ameriprise Financial and American Airlines

0.71

Correlation Coefficient

Ameriprise Financial  American Airlines

Poor diversification

The 3 months correlation between Ameriprise and American is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Ameriprise Financial 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 Ameriprise Financial 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 Ameriprise Financial i.e., Ameriprise Financial and American Airlines go up and down completely randomly.

Pair Corralation between Ameriprise Financial and American Airlines

Assuming the 90 days trading horizon Ameriprise Financial is expected to generate 0.59 times more return on investment than American Airlines. However, Ameriprise Financial is 1.7 times less risky than American Airlines. It trades about 0.1 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.04 per unit of risk. If you would invest  43,044  in Ameriprise Financial on October 20, 2024 and sell it today you would earn a total of  40,255  from holding Ameriprise Financial or generate 93.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.37%
Values	Daily Returns

Ameriprise Financial  vs.  American Airlines Group

Ameriprise Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Ameriprise Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

American Airlines

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, American Airlines sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ameriprise Financial and American Airlines

The main advantage of trading using opposite Ameriprise Financial and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriprise Financial 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 Ameriprise Financial 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.