Correlation Between American Airlines and JetBlue Airways

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

Diversification Opportunities for American Airlines and JetBlue Airways

0.84

Correlation Coefficient

American Airlines  JetBlue Airways

Very poor diversification

The 3 months correlation between American and JetBlue is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and JetBlue Airways Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JetBlue Airways Corp 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 JetBlue Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JetBlue Airways Corp has no effect on the direction of American Airlines i.e., American Airlines and JetBlue Airways go up and down completely randomly.

Pair Corralation between American Airlines and JetBlue Airways

Considering the 90-day investment horizon American Airlines Group is expected to under-perform the JetBlue Airways. But the stock apears to be less risky and, when comparing its historical volatility, American Airlines Group is 1.76 times less risky than JetBlue Airways. The stock trades about -0.27 of its potential returns per unit of risk. The JetBlue Airways Corp is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  801.00  in JetBlue Airways Corp on December 30, 2024 and sell it today you would lose (280.00) from holding JetBlue Airways Corp or give up 34.96% of portfolio value over 90 days.

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

American Airlines Group  vs.  JetBlue Airways Corp

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 uncertain 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.

JetBlue Airways Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days JetBlue Airways Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with American Airlines and JetBlue Airways

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

The idea behind American Airlines Group and JetBlue Airways Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.