Correlation Between American Airlines and Eastern
Can any of the company-specific risk be diversified away by investing in both American Airlines and Eastern 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 Eastern 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 Eastern Co, you can compare the effects of market volatilities on American Airlines and Eastern 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 Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Eastern.
Diversification Opportunities for American Airlines and Eastern
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Eastern is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern 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 Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern has no effect on the direction of American Airlines i.e., American Airlines and Eastern go up and down completely randomly.
Pair Corralation between American Airlines and Eastern
Considering the 90-day investment horizon American Airlines is expected to generate 1.05 times less return on investment than Eastern. But when comparing it to its historical volatility, American Airlines Group is 1.06 times less risky than Eastern. It trades about 0.03 of its potential returns per unit of risk. Eastern Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,362 in Eastern Co on October 7, 2024 and sell it today you would earn a total of 317.00 from holding Eastern Co or generate 13.42% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
American Airlines Group vs. Eastern Co
Performance |
Timeline |
American Airlines |
Eastern |
American Airlines and Eastern Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Airlines and Eastern
The main advantage of trading using opposite American Airlines and Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Eastern 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 Eastern will offset losses from the drop in Eastern's long position.American Airlines vs. Canadian Pacific Railway | American Airlines vs. Volaris | American Airlines vs. Werner Enterprises | American Airlines vs. flyExclusive, |
Eastern vs. Timken Company | Eastern vs. Lincoln Electric Holdings | Eastern vs. Hillman Solutions Corp | Eastern vs. AB SKF |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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