Correlation Between American Airlines and African Discovery
Can any of the company-specific risk be diversified away by investing in both American Airlines and African Discovery 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 African Discovery 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 African Discovery Group, you can compare the effects of market volatilities on American Airlines and African Discovery 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 African Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and African Discovery.
Diversification Opportunities for American Airlines and African Discovery
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and African is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and African Discovery Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Discovery 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 African Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Discovery has no effect on the direction of American Airlines i.e., American Airlines and African Discovery go up and down completely randomly.
Pair Corralation between American Airlines and African Discovery
Considering the 90-day investment horizon American Airlines Group is expected to generate 0.69 times more return on investment than African Discovery. However, American Airlines Group is 1.46 times less risky than African Discovery. It trades about 0.27 of its potential returns per unit of risk. African Discovery Group is currently generating about -0.17 per unit of risk. If you would invest 1,069 in American Airlines Group on September 13, 2024 and sell it today you would earn a total of 689.00 from holding American Airlines Group or generate 64.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
American Airlines Group vs. African Discovery Group
Performance |
Timeline |
American Airlines |
African Discovery |
American Airlines and African Discovery Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Airlines and African Discovery
The main advantage of trading using opposite American Airlines and African Discovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, African Discovery 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 African Discovery will offset losses from the drop in African Discovery's long position.American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. United Airlines Holdings |
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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