Correlation Between Faraday Future and American Airlines

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

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

Diversification Opportunities for Faraday Future and American Airlines

-0.38

Correlation Coefficient

Faraday Future  American Airlines

Very good diversification

The 3 months correlation between Faraday and American is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Future Intelligent and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Faraday Future 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 Faraday Future Intelligent 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 Faraday Future i.e., Faraday Future and American Airlines go up and down completely randomly.

Pair Corralation between Faraday Future and American Airlines

Given the investment horizon of 90 days Faraday Future Intelligent is expected to under-perform the American Airlines. In addition to that, Faraday Future is 9.63 times more volatile than American Airlines Group. It trades about 0.0 of its total potential returns per unit of risk. American Airlines Group is currently generating about 0.02 per unit of volatility. If you would invest  1,634  in American Airlines Group on October 11, 2024 and sell it today you would earn a total of  126.00  from holding American Airlines Group or generate 7.71% return on investment over 90 days.

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

Faraday Future Intelligent  vs.  American Airlines Group

Faraday Future Intel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Faraday Future Intelligent are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Faraday Future exhibited solid returns over the last few months and may actually be approaching a breakup point.

American Airlines

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 18 (%) 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.

Pair Trading with Faraday Future and American Airlines

The main advantage of trading using opposite Faraday Future and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faraday Future 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 Faraday Future Intelligent 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.