Correlation Between BYD ELECTRONIC and American Airlines
Can any of the company-specific risk be diversified away by investing in both BYD ELECTRONIC 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 BYD ELECTRONIC and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD ELECTRONIC and American Airlines Group, you can compare the effects of market volatilities on BYD ELECTRONIC 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 BYD ELECTRONIC with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD ELECTRONIC and American Airlines.
Diversification Opportunities for BYD ELECTRONIC and American Airlines
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BYD and American is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding BYD ELECTRONIC and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and BYD ELECTRONIC 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 BYD ELECTRONIC 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 BYD ELECTRONIC i.e., BYD ELECTRONIC and American Airlines go up and down completely randomly.
Pair Corralation between BYD ELECTRONIC and American Airlines
Assuming the 90 days trading horizon BYD ELECTRONIC is expected to under-perform the American Airlines. But the stock apears to be less risky and, when comparing its historical volatility, BYD ELECTRONIC is 1.1 times less risky than American Airlines. The stock trades about -0.36 of its potential returns per unit of risk. The American Airlines Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 982.00 in American Airlines Group on January 12, 2025 and sell it today you would lose (86.00) from holding American Airlines Group or give up 8.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BYD ELECTRONIC vs. American Airlines Group
Performance |
| Timeline |
| BYD ELECTRONIC |
| American Airlines |
BYD ELECTRONIC and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD ELECTRONIC and American Airlines
The main advantage of trading using opposite BYD ELECTRONIC and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD ELECTRONIC 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.| BYD ELECTRONIC vs. Infrastrutture Wireless Italiane | BYD ELECTRONIC vs. Cairo Communication SpA | BYD ELECTRONIC vs. Meli Hotels International | BYD ELECTRONIC vs. Chengdu PUTIAN Telecommunications |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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