Correlation Between AGNC Investment and American Airlines

Can any of the company-specific risk be diversified away by investing in both AGNC Investment and American Airlines 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 AGNC Investment and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AGNC Investment Corp and American Airlines Group, you can compare the effects of market volatilities on AGNC Investment and American Airlines 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 AGNC Investment with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGNC Investment and American Airlines.

Diversification Opportunities for AGNC Investment and American Airlines

-0.38

Correlation Coefficient

AGNC Investment  American Airlines

Very good diversification

The 3 months correlation between AGNC and American is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding AGNC Investment Corp and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and AGNC Investment 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 AGNC Investment Corp are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of AGNC Investment i.e., AGNC Investment and American Airlines go up and down completely randomly.

Pair Corralation between AGNC Investment and American Airlines

Given the investment horizon of 90 days AGNC Investment is expected to generate 1.87 times less return on investment than American Airlines. But when comparing it to its historical volatility, AGNC Investment Corp is 1.61 times less risky than American Airlines. It trades about 0.02 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,669  in American Airlines Group on October 23, 2024 and sell it today you would earn a total of  158.00  from holding American Airlines Group or generate 9.47% return on investment over 90 days.

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

AGNC Investment Corp  vs.  American Airlines Group

AGNC Investment Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AGNC Investment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AGNC Investment is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

American Airlines

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, American Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AGNC Investment and American Airlines

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

The idea behind AGNC Investment Corp and American Airlines Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.