Correlation Between American Airlines and Freeport

Can any of the company-specific risk be diversified away by investing in both American Airlines and Freeport 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 Freeport 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 Freeport McMoRan 545 percent, you can compare the effects of market volatilities on American Airlines and Freeport 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 Freeport. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Freeport.

Diversification Opportunities for American Airlines and Freeport

-0.67

Correlation Coefficient

American Airlines  Freeport

Excellent diversification

The 3 months correlation between American and Freeport is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Freeport McMoRan 545 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 545 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 Freeport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan 545 has no effect on the direction of American Airlines i.e., American Airlines and Freeport go up and down completely randomly.

Pair Corralation between American Airlines and Freeport

Considering the 90-day investment horizon American Airlines Group is expected to generate 6.07 times more return on investment than Freeport. However, American Airlines is 6.07 times more volatile than Freeport McMoRan 545 percent. It trades about 0.2 of its potential returns per unit of risk. Freeport McMoRan 545 percent is currently generating about -0.41 per unit of risk. If you would invest  1,492  in American Airlines Group on September 25, 2024 and sell it today you would earn a total of  243.00  from holding American Airlines Group or generate 16.29% 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.  Freeport McMoRan 545 percent

American Airlines

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, American Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

Freeport McMoRan 545

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 545 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Freeport McMoRan 545 percent investors.

Pair Trading with American Airlines and Freeport

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

The idea behind American Airlines Group and Freeport McMoRan 545 percent 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.