Correlation Between Lucid and American Airlines

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

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

Diversification Opportunities for Lucid and American Airlines

-0.18

Correlation Coefficient

Lucid  American Airlines

Good diversification

The 3 months correlation between Lucid and American is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Lucid 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 Lucid Group 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 Lucid i.e., Lucid and American Airlines go up and down completely randomly.

Pair Corralation between Lucid and American Airlines

Given the investment horizon of 90 days Lucid Group is expected to generate 1.59 times more return on investment than American Airlines. However, Lucid is 1.59 times more volatile than American Airlines Group. It trades about 0.21 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.21 per unit of risk. If you would invest  225.00  in Lucid Group on October 6, 2024 and sell it today you would earn a total of  104.00  from holding Lucid Group or generate 46.22% return on investment over 90 days.

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

Lucid Group  vs.  American Airlines Group

Lucid Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lucid Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Lucid 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

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, American Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lucid and American Airlines

The main advantage of trading using opposite Lucid and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucid 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 Lucid Group 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.