Correlation Between Adtalem Global and American Airlines

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

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

Diversification Opportunities for Adtalem Global and American Airlines

0.08

Correlation Coefficient

Adtalem Global  American Airlines

Significant diversification

The 3 months correlation between Adtalem and American is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Adtalem Global Education and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Adtalem Global 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 Adtalem Global Education 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 Adtalem Global i.e., Adtalem Global and American Airlines go up and down completely randomly.

Pair Corralation between Adtalem Global and American Airlines

Given the investment horizon of 90 days Adtalem Global Education is expected to generate 0.83 times more return on investment than American Airlines. However, Adtalem Global Education is 1.21 times less risky than American Airlines. It trades about 0.11 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.22 per unit of risk. If you would invest  8,728  in Adtalem Global Education on December 20, 2024 and sell it today you would earn a total of  1,217  from holding Adtalem Global Education or generate 13.94% return on investment over 90 days.

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

Adtalem Global Education  vs.  American Airlines Group

Adtalem Global Education

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adtalem Global Education are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Adtalem Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Adtalem Global and American Airlines

The main advantage of trading using opposite Adtalem Global and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adtalem Global 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 Adtalem Global Education 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.