Correlation Between American Airlines and GUARDANT HEALTH
Can any of the company-specific risk be diversified away by investing in both American Airlines and GUARDANT HEALTH 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 GUARDANT HEALTH 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 GUARDANT HEALTH CL, you can compare the effects of market volatilities on American Airlines and GUARDANT HEALTH 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 GUARDANT HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and GUARDANT HEALTH.
Diversification Opportunities for American Airlines and GUARDANT HEALTH
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and GUARDANT is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and GUARDANT HEALTH CL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUARDANT HEALTH CL 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 GUARDANT HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUARDANT HEALTH CL has no effect on the direction of American Airlines i.e., American Airlines and GUARDANT HEALTH go up and down completely randomly.
Pair Corralation between American Airlines and GUARDANT HEALTH
Assuming the 90 days horizon American Airlines is expected to generate 4.04 times less return on investment than GUARDANT HEALTH. But when comparing it to its historical volatility, American Airlines Group is 1.66 times less risky than GUARDANT HEALTH. It trades about 0.01 of its potential returns per unit of risk. GUARDANT HEALTH CL is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,060 in GUARDANT HEALTH CL on September 2, 2024 and sell it today you would earn a total of 258.00 from holding GUARDANT HEALTH CL or generate 8.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. GUARDANT HEALTH CL
Performance |
| Timeline |
| American Airlines |
| GUARDANT HEALTH CL |
American Airlines and GUARDANT HEALTH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and GUARDANT HEALTH
The main advantage of trading using opposite American Airlines and GUARDANT HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, GUARDANT HEALTH 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 GUARDANT HEALTH will offset losses from the drop in GUARDANT HEALTH's long position.| American Airlines vs. Southwest Airlines Co | American Airlines vs. Superior Plus Corp | American Airlines vs. NMI Holdings | American Airlines vs. Origin Agritech |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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