Correlation Between American Aires and LGL

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

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

Diversification Opportunities for American Aires and LGL

0.13

Correlation Coefficient

American Aires  LGL

Average diversification

The 3 months correlation between American and LGL is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding American Aires and LGL Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGL Group and American Aires 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 Aires are associated (or correlated) with LGL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGL Group has no effect on the direction of American Aires i.e., American Aires and LGL go up and down completely randomly.

Pair Corralation between American Aires and LGL

Assuming the 90 days horizon American Aires is expected to generate 2.05 times more return on investment than LGL. However, American Aires is 2.05 times more volatile than LGL Group. It trades about 0.03 of its potential returns per unit of risk. LGL Group is currently generating about -0.05 per unit of risk. If you would invest  14.00  in American Aires on December 5, 2024 and sell it today you would earn a total of  0.00  from holding American Aires or generate 0.0% return on investment over 90 days.

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

American Aires  vs.  LGL Group

American Aires

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Aires are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, American Aires reported solid returns over the last few months and may actually be approaching a breakup point.

LGL Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LGL Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, LGL may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with American Aires and LGL

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

The idea behind American Aires and LGL 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.