Correlation Between American Airlines and Adtalem Global

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

Diversification Opportunities for American Airlines and Adtalem Global

0.08

Correlation Coefficient

American Airlines  Adtalem Global

Significant diversification

The 3 months correlation between American and Adtalem is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Adtalem Global Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adtalem Global Education 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 Adtalem Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adtalem Global Education has no effect on the direction of American Airlines i.e., American Airlines and Adtalem Global go up and down completely randomly.

Pair Corralation between American Airlines and Adtalem Global

Considering the 90-day investment horizon American Airlines Group is expected to under-perform the Adtalem Global. In addition to that, American Airlines is 1.21 times more volatile than Adtalem Global Education. It trades about -0.22 of its total potential returns per unit of risk. Adtalem Global Education is currently generating about 0.11 per unit of volatility. If you would invest  8,728  in Adtalem Global Education on December 20, 2024 and sell it today you would earn a total of  1,217  from holding Adtalem Global Education or generate 13.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

American Airlines Group  vs.  Adtalem Global Education

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 conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Adtalem Global Education

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adtalem Global Education are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Adtalem Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Airlines and Adtalem Global

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

The idea behind American Airlines Group and Adtalem Global Education 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.