Correlation Between TFI International and American Airlines

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

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

Diversification Opportunities for TFI International and American Airlines

0.47

Correlation Coefficient

TFI International  American Airlines

Very weak diversification

The 3 months correlation between TFI and American is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding TFI International and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and TFI International 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 TFI International 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 TFI International i.e., TFI International and American Airlines go up and down completely randomly.

Pair Corralation between TFI International and American Airlines

Given the investment horizon of 90 days TFI International is expected to under-perform the American Airlines. But the stock apears to be less risky and, when comparing its historical volatility, TFI International is 1.46 times less risky than American Airlines. The stock trades about 0.0 of its potential returns per unit of risk. The American Airlines Group is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,319  in American Airlines Group on October 6, 2024 and sell it today you would earn a total of  378.00  from holding American Airlines Group or generate 28.66% return on investment over 90 days.

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

TFI International  vs.  American Airlines Group

TFI International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, TFI International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 TFI International and American Airlines

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