Correlation Between American Airlines and ALTRIA

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

Diversification Opportunities for American Airlines and ALTRIA

-0.1

Correlation Coefficient

American Airlines  ALTRIA

Good diversification

The 3 months correlation between American and ALTRIA is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and ALTRIA GROUP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALTRIA GROUP INC 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 ALTRIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALTRIA GROUP INC has no effect on the direction of American Airlines i.e., American Airlines and ALTRIA go up and down completely randomly.

Pair Corralation between American Airlines and ALTRIA

Considering the 90-day investment horizon American Airlines Group is expected to under-perform the ALTRIA. In addition to that, American Airlines is 2.02 times more volatile than ALTRIA GROUP INC. It trades about -0.21 of its total potential returns per unit of risk. ALTRIA GROUP INC is currently generating about 0.05 per unit of volatility. If you would invest  6,809  in ALTRIA GROUP INC on December 24, 2024 and sell it today you would earn a total of  276.00  from holding ALTRIA GROUP INC or generate 4.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

American Airlines Group  vs.  ALTRIA GROUP INC

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.

ALTRIA GROUP INC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ALTRIA GROUP INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ALTRIA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Airlines and ALTRIA

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

The idea behind American Airlines Group and ALTRIA GROUP INC 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.