Correlation Between American Airlines and AVITA Medical
Can any of the company-specific risk be diversified away by investing in both American Airlines and AVITA Medical 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 AVITA Medical 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 AVITA Medical, you can compare the effects of market volatilities on American Airlines and AVITA Medical 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 AVITA Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and AVITA Medical.
Diversification Opportunities for American Airlines and AVITA Medical
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and AVITA is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and AVITA Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVITA Medical 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 AVITA Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVITA Medical has no effect on the direction of American Airlines i.e., American Airlines and AVITA Medical go up and down completely randomly.
Pair Corralation between American Airlines and AVITA Medical
Assuming the 90 days horizon American Airlines is expected to generate 1.29 times less return on investment than AVITA Medical. But when comparing it to its historical volatility, American Airlines Group is 1.52 times less risky than AVITA Medical. It trades about 0.02 of its potential returns per unit of risk. AVITA Medical is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 242.00 in AVITA Medical on September 4, 2024 and sell it today you would lose (2.00) from holding AVITA Medical or give up 0.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
American Airlines Group vs. AVITA Medical
Performance |
| Timeline |
| American Airlines |
| AVITA Medical |
American Airlines and AVITA Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and AVITA Medical
The main advantage of trading using opposite American Airlines and AVITA Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, AVITA Medical 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 AVITA Medical will offset losses from the drop in AVITA Medical's long position.| American Airlines vs. Delta Air Lines | American Airlines vs. AIR CHINA LTD | American Airlines vs. RYANAIR HLDGS ADR | American Airlines vs. Southwest Airlines Co |
| AVITA Medical vs. Vastned Retail NV | AVITA Medical vs. JIAHUA STORES | AVITA Medical vs. Kaiser Aluminum | AVITA Medical vs. GREENX METALS LTD |
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 Stocks Directory module to find actively traded stocks across global markets.
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