Correlation Between Netcall PLC and American Airlines

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

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

Diversification Opportunities for Netcall PLC and American Airlines

0.74

Correlation Coefficient

Netcall PLC  American Airlines

Poor diversification

The 3 months correlation between Netcall and American is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Netcall PLC and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Netcall PLC 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 Netcall PLC 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 Netcall PLC i.e., Netcall PLC and American Airlines go up and down completely randomly.

Pair Corralation between Netcall PLC and American Airlines

Assuming the 90 days trading horizon Netcall PLC is expected to generate 2.14 times less return on investment than American Airlines. In addition to that, Netcall PLC is 1.07 times more volatile than American Airlines Group. It trades about 0.09 of its total potential returns per unit of risk. American Airlines Group is currently generating about 0.21 per unit of volatility. If you would invest  1,404  in American Airlines Group on October 5, 2024 and sell it today you would earn a total of  244.00  from holding American Airlines Group or generate 17.38% return on investment over 90 days.

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

Netcall PLC  vs.  American Airlines Group

Netcall PLC

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Netcall PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, Netcall PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

American Airlines

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days American Airlines Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, American Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netcall PLC and American Airlines

The main advantage of trading using opposite Netcall PLC and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netcall PLC 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 Netcall PLC 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.