Correlation Between American Airlines and Virgin Group
Can any of the company-specific risk be diversified away by investing in both American Airlines and Virgin Group 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 Virgin Group 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 Virgin Group Acquisition, you can compare the effects of market volatilities on American Airlines and Virgin Group 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 Virgin Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Virgin Group.
Diversification Opportunities for American Airlines and Virgin Group
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Virgin is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Virgin Group Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Group Acquisition 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 Virgin Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Group Acquisition has no effect on the direction of American Airlines i.e., American Airlines and Virgin Group go up and down completely randomly.
Pair Corralation between American Airlines and Virgin Group
Considering the 90-day investment horizon American Airlines is expected to generate 21.96 times less return on investment than Virgin Group. But when comparing it to its historical volatility, American Airlines Group is 2.58 times less risky than Virgin Group. It trades about 0.03 of its potential returns per unit of risk. Virgin Group Acquisition is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 148.00 in Virgin Group Acquisition on October 11, 2024 and sell it today you would earn a total of 28.00 from holding Virgin Group Acquisition or generate 18.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
American Airlines Group vs. Virgin Group Acquisition
Performance |
Timeline |
American Airlines |
Virgin Group Acquisition |
American Airlines and Virgin Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Airlines and Virgin Group
The main advantage of trading using opposite American Airlines and Virgin Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Virgin Group 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 Virgin Group will offset losses from the drop in Virgin Group's long position.American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. United Airlines Holdings | American Airlines vs. Frontier Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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