Correlation Between GUARDANT HEALTH and American Airlines
Can any of the company-specific risk be diversified away by investing in both GUARDANT HEALTH 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 GUARDANT HEALTH and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GUARDANT HEALTH CL and American Airlines Group, you can compare the effects of market volatilities on GUARDANT HEALTH 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 GUARDANT HEALTH with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of GUARDANT HEALTH and American Airlines.
Diversification Opportunities for GUARDANT HEALTH and American Airlines
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GUARDANT and American is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding GUARDANT HEALTH CL and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and GUARDANT HEALTH 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 GUARDANT HEALTH CL 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 GUARDANT HEALTH i.e., GUARDANT HEALTH and American Airlines go up and down completely randomly.
Pair Corralation between GUARDANT HEALTH and American Airlines
Assuming the 90 days horizon GUARDANT HEALTH CL is expected to generate 2.38 times more return on investment than American Airlines. However, GUARDANT HEALTH is 2.38 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 -0.38 per unit of risk. If you would invest 4,435 in GUARDANT HEALTH CL on November 28, 2024 and sell it today you would lose (404.00) from holding GUARDANT HEALTH CL or give up 9.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GUARDANT HEALTH CL vs. American Airlines Group
Performance |
| Timeline |
| GUARDANT HEALTH CL |
| American Airlines |
GUARDANT HEALTH and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GUARDANT HEALTH and American Airlines
The main advantage of trading using opposite GUARDANT HEALTH and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GUARDANT HEALTH 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.| GUARDANT HEALTH vs. ANTA Sports Products | GUARDANT HEALTH vs. SBI Insurance Group | GUARDANT HEALTH vs. The Hanover Insurance | GUARDANT HEALTH vs. RCS Mediagroup SpA |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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