Correlation Between American Airlines and Adriatic Metals
Can any of the company-specific risk be diversified away by investing in both American Airlines and Adriatic Metals 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 American Airlines and Adriatic Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and Adriatic Metals Plc, you can compare the effects of market volatilities on American Airlines and Adriatic Metals 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 American Airlines with a short position of Adriatic Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Adriatic Metals.
Diversification Opportunities for American Airlines and Adriatic Metals
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Adriatic is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Adriatic Metals Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals Plc and American Airlines 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 American Airlines Group are associated (or correlated) with Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals Plc has no effect on the direction of American Airlines i.e., American Airlines and Adriatic Metals go up and down completely randomly.
Pair Corralation between American Airlines and Adriatic Metals
Assuming the 90 days horizon American Airlines Group is expected to generate 1.36 times more return on investment than Adriatic Metals. However, American Airlines is 1.36 times more volatile than Adriatic Metals Plc. It trades about 0.19 of its potential returns per unit of risk. Adriatic Metals Plc is currently generating about 0.04 per unit of risk. If you would invest 1,257 in American Airlines Group on August 29, 2024 and sell it today you would earn a total of 154.00 from holding American Airlines Group or generate 12.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Adriatic Metals Plc
Performance |
| Timeline |
| American Airlines |
| Adriatic Metals Plc |
American Airlines and Adriatic Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Adriatic Metals
The main advantage of trading using opposite American Airlines and Adriatic Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Adriatic Metals 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 Adriatic Metals will offset losses from the drop in Adriatic Metals' long position.| American Airlines vs. GRIFFIN MINING LTD | American Airlines vs. Corporate Office Properties | American Airlines vs. Zijin Mining Group | American Airlines vs. Perseus Mining Limited |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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