Correlation Between MidCap Financial and American Airlines
Can any of the company-specific risk be diversified away by investing in both MidCap Financial 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 MidCap Financial and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MidCap Financial Investment and American Airlines Group, you can compare the effects of market volatilities on MidCap Financial 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 MidCap Financial with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and American Airlines.
Diversification Opportunities for MidCap Financial and American Airlines
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MidCap and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and MidCap Financial 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 MidCap Financial Investment 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 MidCap Financial i.e., MidCap Financial and American Airlines go up and down completely randomly.
Pair Corralation between MidCap Financial and American Airlines
Assuming the 90 days trading horizon MidCap Financial Investment is expected to under-perform the American Airlines. But the stock apears to be less risky and, when comparing its historical volatility, MidCap Financial Investment is 2.74 times less risky than American Airlines. The stock trades about -0.04 of its potential returns per unit of risk. The American Airlines Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,634 in American Airlines Group on October 11, 2024 and sell it today you would earn a total of 91.00 from holding American Airlines Group or generate 5.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MidCap Financial Investment vs. American Airlines Group
Performance |
| Timeline |
| MidCap Financial Inv |
| American Airlines |
MidCap Financial and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MidCap Financial and American Airlines
The main advantage of trading using opposite MidCap Financial and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MidCap Financial 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.| MidCap Financial vs. Southwest Airlines Co | MidCap Financial vs. Singapore Airlines Limited | MidCap Financial vs. GRENKELEASING Dusseldorf | MidCap Financial vs. JAPAN AIRLINES |
| American Airlines vs. INDOFOOD AGRI RES | American Airlines vs. TYSON FOODS A | American Airlines vs. Performance Food Group | American Airlines vs. INTERSHOP Communications Aktiengesellschaft |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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