Correlation Between Ping An and American Airlines

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

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

Diversification Opportunities for Ping An and American Airlines

-0.44

Correlation Coefficient

Ping An  American Airlines

Very good diversification

The 3 months correlation between Ping and American is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Ping An 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 Ping An Insurance 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 Ping An i.e., Ping An and American Airlines go up and down completely randomly.

Pair Corralation between Ping An and American Airlines

Assuming the 90 days trading horizon Ping An Insurance is expected to generate 1.21 times more return on investment than American Airlines. However, Ping An is 1.21 times more volatile than American Airlines Group. It trades about 0.09 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.37 per unit of risk. If you would invest  537.00  in Ping An Insurance on December 4, 2024 and sell it today you would earn a total of  22.00  from holding Ping An Insurance or generate 4.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Ping An Insurance  vs.  American Airlines Group

Ping An Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ping An Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ping An is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 nearly stable basic indicators, American Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ping An and American Airlines

The main advantage of trading using opposite Ping An and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ping An 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 Ping An Insurance 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.