Correlation Between Pinterest and American Airlines

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

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

Diversification Opportunities for Pinterest and American Airlines

-0.25

Correlation Coefficient

Pinterest  American Airlines

Very good diversification

The 3 months correlation between Pinterest and American is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Pinterest and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Pinterest 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 Pinterest 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 Pinterest i.e., Pinterest and American Airlines go up and down completely randomly.

Pair Corralation between Pinterest and American Airlines

Given the investment horizon of 90 days Pinterest is expected to generate 1.03 times more return on investment than American Airlines. However, Pinterest is 1.03 times more volatile than American Airlines Group. It trades about 0.06 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.04 per unit of risk. If you would invest  3,230  in Pinterest on December 4, 2024 and sell it today you would earn a total of  287.00  from holding Pinterest or generate 8.89% return on investment over 90 days.

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

Pinterest  vs.  American Airlines Group

Pinterest

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pinterest are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Pinterest may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 latest abnormal performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Pinterest and American Airlines

The main advantage of trading using opposite Pinterest and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinterest 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 Pinterest 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.