Correlation Between Rayonier Advanced and American Airlines

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

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

Diversification Opportunities for Rayonier Advanced and American Airlines

0.0

Correlation Coefficient

Rayonier Advanced  American Airlines

Pay attention - limited upside

The 3 months correlation between Rayonier and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Rayonier Advanced Materials and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Rayonier Advanced 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 Rayonier Advanced Materials 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 Rayonier Advanced i.e., Rayonier Advanced and American Airlines go up and down completely randomly.

Pair Corralation between Rayonier Advanced and American Airlines

Assuming the 90 days horizon Rayonier Advanced Materials is expected to generate 1.62 times more return on investment than American Airlines. However, Rayonier Advanced is 1.62 times more volatile than American Airlines Group. It trades about 0.03 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.02 per unit of risk. If you would invest  580.00  in Rayonier Advanced Materials on October 11, 2024 and sell it today you would earn a total of  175.00  from holding Rayonier Advanced Materials or generate 30.17% return on investment over 90 days.

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

Rayonier Advanced Materials  vs.  American Airlines Group

Rayonier Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rayonier Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Rayonier Advanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

American Airlines

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, American Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rayonier Advanced and American Airlines

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

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.